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Twenty years ago, a practical person could fix a car, but now the engineering has become so complex that only a qualified mechanic can do so. Today, something similar could be said of the world of wealth management. As it becomes far more complicated, there is a greater need for specialists, collaboration and technology.

Intermediaries are acutely aware of this, as they told us in a survey Julius Baer conducted jointly with Deloitte at the beginning of 2020, canvassing clients from Switzerland, the UK and Spain. One of the key findings was that they intended to delegate more to partners.

Why would they want to do so? The truth is that clients want to do far more with their wealth today and there is an increasingly wide range of products and solutions for them to invest in. Yet fast-moving financial markets are harder to judge. And there are myriad new regulations in the EU, Switzerland and the UK, which are putting pressure on intermediaries to raise efficiency.

While it is possible to craft valuable holistic wealth management solutions for clients, doing so requires input from a range of specialists today. To achieve this, survey participants plan to either delegate existing capabilities or source expertise and technology systems they do not have.

Four leading requirements

In our survey the following four areas of expertise were identified:

1. Portfolio management systems
Intermediaries want to access their custodian banks’ portfolio management systems. Doing so is free, as opposed to a cost of between CHF 40,000 to CHF 120,000 a year for an independent system. There is a trade-off though because an independent system has the advantage of allowing an intermediary to access all custodian banks at the same time. The largest custodian banks are continuously investing in improving the solutions they offer, adding new functions every year such as Julius Baer’s development of the SPARK structured products engine.

2. Back and middle office services
In a quest to reduce costs, intermediaries are looking to balance back and middle office functions between themselves and the custodian banks. However, the easiest way to foster efficiency is through straight-through processing (STP) that enables automation, reduces operational risks and increases speed of the implementation of the investment view. When trading in liquid markets, STP through a direct FIX connection to the custodian bank can completely automate the process of execution and reconciliation. There are some limits to automation, however, particularly in the growing field of private markets.

3. Wealth planning
Wealth planning has become far more complex than it used to be. This calls for more specialist expertise, which again can be sourced from a custodian bank. Rather than simply planning, for instance, to retire and buy a house in Italy as could have been the case 20 years ago, a client might dream of sailing around the world after retirement, as well as securing their children’s future, investing sustainably and so on. That calls for a range of specialist investment capabilities, as well as expertise in structuring wealth. Depending on jurisdiction(s), this needs significant global expertise which intermediaries do not always have in-house.

4. Tax
At a time when clients’ affairs are increasingly international and national tax rules constantly changing, few intermediaries have in-depth tax expertise. Recognising its importance for holistic wealth planning, intermediaries are looking for advice about the tax positions of different types of investments and holding structures. The key is to optimise the approach to tax across different countries and investment products.

Empowering success
Just like the evolution to faster, more fuel-efficient and safer cars over the past 20 years, similar trends apply in wealth management. It means that by pairing up in the right areas with external parties, intermediaries can provide their clients with far better services and solutions than they could have done a few years ago. Looking forward, success will depend increasingly on working with partners that can provide the right technology, solutions and coverage.