SEI Investments has announced the results of a research project into the European Private Banking Market, which demonstrates that Private Banks are in need of credible outsource providers to help them grow.
The research demonstrates that Private Banks are under increasing pressure from every aspect of their business. In order to survive, Private Banks need to focus their resource commitments and change their business model by outsourcing key areas of the business. However, the research reveals, that whilst Private Banks recognise the need to outsource they are reluctant to do so at the present time because of a lack of credible providers.
SEIs response to this problem is to develop a new Wealth Management Service, which combines asset management, client administration and back office processing to meet the needs of the Private Banking market. The service will be available in the latter part of 2004.
According to the research, market performance, investor caution and regulation are the key concerns in the current business environment with investment management stated as the most important priority for Private Banks (52%), with client retention (48%) and client acquisition (44%) close behind. However, only 18% stated investment management will remain a core priority while 50% stated client retention and acquisition would become more important in the future. Wealth management firms recognise that they have no choice but to concentrate on gaining new clients and nurturing existing ones.
Companies are experiencing major cost pressures across many functions -outsourcing presents one solution if integrated effectively. However, there is still significant resistance to outsourcing, with 74% stating that their biggest concern was loss of control and 62% concerned that they would not be able to guarantee service quality. Although in reality, the research shows that those that have embraced outsourcing have not experienced any loss of control or service quality. Companies that have outsourced name cost saving as the most important benefit, with 46% citing a reduction in operational costs, and 29% stating that outsourcing had improved the companys strategic focus. Of those surveyed 94% say that outsourcing the back office has been as successful as expected and 80% cite success in outsourcing investment management. Whilst there is scepticism about outsourcing experience shows that the scepticism is groundless in the hands of a skilled provider.
Francis Jackson, Managing Director, Global Private Banking Services commented, “From the research it is clear that the European Wealth Management business model is set to change. Reduction in resource commitments to non core areas is inevitable. Yet, as this research shows, many institutions are resistant to even this type of change, citing issues such as a loss of control and a fear of the unknown because there are very few specialist outsource solution providers that can partner with them through the process. The marketplace is crying out for a solution that combines full back office with asset management and we believe we can provide an answer to this problem.”
Jackson continued to state that, “They want to find a provider that recognises the complexities of the wealth management business and who is prepared to partner with them to develop a workable solution. That is exactly what we will be providing, and we are investing substantially in a new Wealth Management Service that will be tailored for Private Banks. SEI is already one of the leading providers in Wealth Management Services in the US and this new platform, combined with our experience in investment management, will mean that we can deliver solutions that cannot be accessed elsewhere.”
To help SEI tailor its solutions to the needs of Private Banks in Europe quantitative and qualitative research was undertaken amongst major wealth management institutions and their clients in ten European countries. This research project is the eighth to be undertaken by SEI in the European asset management marketplace since their launch in the UK in June 2000 and is the first to analyse the Private Banking market.