Wealth management firms face a new kind of balancing act, both enabled by and risk-managed with technology. Weighing client demand for more personalized advice, and advisors who need to serve clients with scale and efficiency, firms are on the front lines when it comes to creating the right approaches.
The firms of the future will find ways to capitalize on their size advantage. As discussed in our recent white paper, there are a number of evolving key trends and important strategic factors for firms to consider as they make decisions about future technology. The most important common denominator here is scale and the need for efficiency while not sacrificing a client focus:
- Enabling financial advisors to pursue niche markets and offer unique value propositions, while still following home office guidelines
- The ability to efficiently increase the scale of accounts, both in number and level of assets
- Supporting investors through their personal financial journeys
- Efficient and automated account services, reducing advisor and home office workload
- Offering engaging, transparent digital experiences to advisors and their clients
I see these things as critical to firms of the future because they are the things firms are already asking Vestmark to help them with today. Here are a few illustrative examples that bring to life the importance of getting this balance right.
Support for Personalization Through Direct Indexing
This first area ladders up to one core idea: More control and customization for clients. SMAs and direct indexes, of course, allow investors to own the underlying securities of their portfolio, and thereby achieve a high degree of customization, as well as much more ability to drive tax-alpha in the portfolio.
For one Vestmark client, which manages $14B in assets across more than 12,000 accounts on the VestmarkONE® platform, success means efficiently rebalancing, personalizing, and handling tax management for all accounts. The already large task is made even more challenging by the fact that no two accounts are exactly alike; the key value this client offers its investors is personalization.
The VestmarkONE platform enables this client to construct, manage and trade/rebalance these accounts efficiently, at scale. The system’s automated rules-based workflows enable users to trade customized accounts alongside others in an automated workflow, eliminating manual tasks, saving time and enabling the trading and rebalancing of thousands of accounts – in a tax aware manner – in minutes.
The system was put to the test during the volatility in the spring of 2020. Already processing more than 100,000 trades per quarter, the firm saw volumes almost triple in March and April of that year – a real-life stress test of the platform, which seamlessly handled the increase in transactions with no disruptions to service or execution.
Supporting More Clients and More Solutions Efficiently and At Scale
Another Vestmark client has been rapidly broadening its range of solutions via M&A to serve a larger base of clients and offer those clients more investment options.
For this client, efficient scaling is also important, in two ways. First, as it grows in leaps with each acquisition and gradually through organic growth, it needs the raw power that the VestmarkONE platform provides. Some older platforms can’t process transactions fast enough to be ready for trading following a high-volume trading day – while this may sound mundane, this can represent a fundamental breaking point for a large and growing firm.
Just as important is scalability in the sense of breadth, which is key to the firm’s long-term strategy. By adding financial solutions to fill gaps in the firm’s lineup and bringing clients across divisions into a common platform, this firm can bring together the strength and expertise of all its different business units, from fixed income to direct indexing, into a single personalized UMA account for each of its clients.
To make this happen, the client has taken advantage of the flexibility of the VestmarkONE platform. Instead of transitioning all of the specialized tools used by some of its divisions, these can be left in place and linked to the core platform, speeding their integration into the overall firm to support the strategy instead of requiring a full migration.
The firm also benefits through a common operating model, centralized training and onboarding, and the opportunity to easily cross-sell and upsell existing clients.
The Bottom Line: Flexibility Plus Efficiency
In both this example and the firm mentioned previously, using Vestmark as an outsourced back office for a significant part of their business has also enabled these firms to reduce their cost of service, helping them find margins where they are thin and getting thinner.
While different firms will pursue different approaches, their end goal is always driven by the needs and expectations of clients and the advisors who serve them. The ability to react and thrive will require equal parts strength and flexibility. Those are the real hallmarks of a firm of the future – and Vestmark aims to be the partner who helps them get there.
By Rob Klapprodt, Corporate Strategy Officer