Why Has The Wealth Industry Moved to Open Architecture?
Critical Trade Offs / Right and Wrong Decisions / How to Deploy
Short Answer: Pressure from competitors, the changing demands of more sophisticated clients and the desire to achieve a scalable business model.
Long Answer: In this environment of cost containment and earnings pressure a wealth management organization must find a way to adapt the manufacturing and distribution process to keep a competitive edge and to enhance profitability. It comes as no surprise to wealth management professionals that the sophistication and changing expectations of clients now require we “up our game” to deliver access to excellent investment management, at scale. The attribute of “at scale” is critical because a significant challenge is to manage a competitive cost and fee structure without cannibalizing a firm’s revenue stream which is usually dependent on a proprietary style. That is, how should a firm structure its open architecture business model and deploy a solution?
There are myriad ways to construct a platform to deliver investment management. Like any choice with underlying complexity, there are more wrong answers than right, unfortunately. Many firms have been sold promises and have cobbled together platforms and access to third party managers and found all they did was to add cost and complexity to their business model, never having achieved any uniform adoption much less scale.
Firms undertaking a review of their competitive footprint and changes to their manufacturing and distribution process will have to make fully informed, experience-based, decisions about the implications of topics including: Separately Managed Accounts (SMA); Unified Managed Accounts (UMA); the various forms of overlay technology; Unified Managed Householding (UMH); turnkey providers (TAMPs); and, point solution business models. Each of these above mentioned business models and/or technologies has a direct impact on the ability to customize the client experience; the cost structure of the business model; profitability; and, the ability to achieve scale.
We have been told by our clients that the value of our guidance is we “cut through the sales hype and find solutions.” We would be pleased to help you too.
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