The ever-evolving wealthtech landscape

While technology has been around for a while, its adoption in the wealth management space is still in relative infancy.

Chris Fisher, the chief executive of Multrees Investor Services, a provider of investment administration, technology and custody, spoke to Katie Royals about the wealth sector’s technological evolution. 

The wealth management space has “always been the least mature end of an immature industry”.

Within investment management, technology was first adopted by the institutional investment market. This was likely due to the desire for scalability and a variable cost model Mr Fisher explained.

After this, technology began to move into middle office outsourcing before later appearing in the private client wealth management space.

Mr Fisher made the comparison to the car manufacturing industry. It produces cars very efficiently and on a big scale. Currently, the wealth management sector is less efficient.

“I think what you are seeing is a maturing of the market as more products and services become available across the entire spectrum.”

Even 15 years ago, there would not be a technology offering to suit the IFA model or boutique firms.

Now, these firms have the opportunity to “own the whole client journey”. This means they can offer clients more services and do not need to outsource as much, which should improve client relationships.

The service providers are maturing alongside the sector, meaning the service offering is continually developing and evolving.

The regulators are at least partially responsible for some of this change. The FCA’s work to focus on putting the consumer front and centre has certainly had an impact in this regard.

The need to offer a fair product and service for a fair price “drives change”, Mr Fisher explained.

“Cost and quality are the two main drivers,” he said.

Firms want to reduce their costs, while improving the quality of their offering to give clients a better overall experience.

As a result of this – and pandemic-related changes - demand is up. Mr Fisher said Multrees has grown more in the past three years than it has in the past six or seven years.

“It is not a normal cycle though,” he warned.

Coming out of the pandemic into a high inflationary environment has distorted the market to some extent. As firms grapple with flexible working and increased desire for technological solutions, wealth managers are beginning to realise they must mature both as individual businesses, but also as a sector.

This is leading to firms wanting to outsource more and more as they realise they need to keep improving their offerings.

For Multrees – and other service providers – to keep up, scalability is key. These firms need to keep providing high quality services and products without becoming more expensive.

Mr Fisher said Multrees invests in its people and technology to help it do this.

“You have got to have good quality staff,” he stressed.

Hiring is “challenging” at the moment. The labour market is very tight, making both attracting and retaining staff difficult. Multrees likes to develop talent from within and has its own graduate programme to help with this.

In terms of outsourcing, boutique firms tend to be the more common buyers, Mr Fisher explained. This is because larger firms tend to have their own “bits of infrastructure” they have to work round and will often have existing in-house teams working on this.

Despite this, consolidation in the industry is not a worry, however.

“It is a constant cycle,” Mr Fisher said. With M&A activity, a lot of firms keep getting bigger.

However, lots of investment managers and clients alike prefer a smaller, entrepreneurial environment. This leads to individuals starting out on their own.

“The choice is always going to be there,” Mr Fisher stressed.

Choice is a key part of Multrees’ offering too.

It operates an almost “pic ‘n’ mix” model, in which firms can select which solutions or parts of solutions they want to use. And this is likely to change over time.

“Some clients want everything for the start. Others just want to try a few bits.” As firms grow, they may choose to reduce the services they use. Others may want to increase what they use as they become more comfortable with the technology.

It is common for firms to begin by outsourcing the services furthest away from clients, like custody. They may well then begin outsourcing more client-facing services as they trust they are genuinely getting a good service.

As a whole, the sector is “continually evolving”. This is why Mr Fisher believes having good and adaptable people is the most important thing.

Equally, developing strong client relationships helps as it allows Multrees to really understand what firms want and need.

“Our best relationships are where the client thinks we are part of their operation,” he concluded.