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Are you supporting tomorrow’s

wealth management with

yesterday’s technology?

Accelerating the transformation of

wealth management through digital technology

Digital Disruption in Wealth Management

28 November 2017 Digital Disruption in Wealth Management

OverviewDigital Disruption in Wealth Management

Contacts

Methodology

► Global report on technology transformation in wealth management issued for the second time

► Report based on detailed industry analysis of the following sources

► Global survey and face-to-face interviews with IT executives and technology leaders of

30+ leading wealth managers across EMEA, Asia Pacific and Americas

► Proprietary database covering technology spend and return on investment of wealth managers globally

Purpose of this presentation

► This presentation summarizes the key findings of the global report specific to Switzerland, i.e., for

► Swiss wealth managers and

► Switzerland as a wealth management hub

Dr. Robert Rümmler

Ernst & Young AG

Senior Manager

Phone: +41 58 289 42 67

[email protected]

Tom Schmidt

Ernst & Young AG

Partner

Phone: +41 58 289 64 77

[email protected]


Swiss wealth managers are not driving technology leadership

(1 of 3)

Source: EY analysis

No IT strategy for

digital transformation

defined

IT strategy for digital

transformation

under development

IT strategy for digital

transformation

defined and agreed

17

50

33

% of respondents who agree or strongly agree

Which of these statements best describes your IT strategy for digital transformation?

Only few Swiss wealth managers actually have an IT strategy for digital transformation



(2 of 3)

Source: EY analysis

What level of disruption do you expect over the next 2 to 3 years from the following sources?

Swiss wealth managers are still preoccupied with ensuring compliance with changing regulatory requirements

New compliance and

regulatory requirements

Emerging technology

trends (e.g., mobile first,

robotics)

Emerging business

models

(e.g., robo-advisors)

New IT processes

(e.g., agile and DevOps)

67

17

67

50




(3 of 3)

Source: EY analysis

Swiss wealth managers do not use nor are even actively considering robotics-driven process automation

Cloud infrastructurewe currently operate cloud

technology or are actively

considering its deployment

Big data analyticswe currently operate big

data technology or are

actively considering its

deployment

Robotic process

automationwe currently operate robotics

technology or are actively

considering its deployment

83

17

50

Please indicate the level to which certain technologies are deployed within your organization



Swiss wealth management is falling behind other international hubs

(1 of 4)

Source: EY analysis

While the rest of the world have their sights firmly fixed on revenue growth, Swiss wealth managers are largely

preoccupied with regulatory compliance

Which of these strategic business priorities is IT expected to have the most impact on?


Switzerland

Regulatory compliance

Revenue growth and

protection

Operational efficiency

and improvement

33

33

83

58

79

63

Rest of the world



(2 of 4)

Source: EY analysis

Wealth managers in Asia Pacific are pushing for better innovation and digital capabilities much more than Switzerland

as a wealth management hub

What are your key objectives for your IT function over the coming years?


Cost reduction

Stability

Time-to-market

improvement

Risk reduction

(e.g., cybersecurity)

Innovation and digital

capabilities

33

17

33

33

67

80

60

40

20

80

Switzerland Asia Pacific



(3 of 4)

In contrast to their Swiss counterparts, the vast majority of APAC wealth managers believe the digital transformation is

relevant in the short term

How relevant is digital transformation to your business in the short term?


Source: EY analysis

Americas

33%

60%

Asia PacificSwitzerland

33%

38%

EMEIA



(4 of 4)

Source: EY analysis

Swiss wealth managers are hesitant to invest in third-party applications integration and other technology capabilities

How important are the following areas for your ongoing and future digital investments?


Switzerland Rest of the world

Integration of third-party

applications e.g., application

programming interfaces

Investment in data

analytics capabilitiese.g., to support

personalization of offerings

Incorporating new

technologies e.g., cloud, big data,

robotics

83

83

57

96

83

88


IT talent has become a key strategic resource that wealth managers

are going to increasingly struggle to attract and retain (1 of 2)

Demand for IT staff is continuously growing

% of total staff of wealth managers

Compensation gap is growing

Unit cost per staff, $ thousand

IT external staff

IT internal staff

+6.7%

1.7

6.7

2013

8.4

2014

2.8

6.7

9.5

2015

2.5

7.1

9.6

2016

3.0

7.2

10.2

2013

173

2014 2015 2016

104

171

+64%

106

167

+58%

107

166

+55%

111

+56%

Unit cost per IT internal staff

Unit cost per total internal staff

Source: EY analysis


IT talent has become a key strategic resource that wealth managers

are going to increasingly struggle to attract and retain (2 of 2)

Source: EY analysis

Monetary incentives and a structured career path are not seen as effective measures to retain IT talent

What are the most effective means of attracting more talent for your IT function?


Interesting challenges e.g., working with innovative

technology

83

Recognition as a valued

function50

Way of working e.g., collaboration and work

model

37

Monetary incentives 20

Structured career path 17


Most wealth managers fail to capture value from outsourcing

Excessive outsourcing often results in much higher costs

Source: EY analysis

IT share of cost, %

IT outsourcing ratio, %

0 20 40 60 80

20

10

Value gap

∅ 35

Idealized trend line

Actual trend line


Leading wealth managers spend less on their technology but

actually deliver more value to their organization

Source: EY analysis

Top performers Bottom performersBest practice Trend lineBubble size represents AuM

Business expense as % of operating income, %

Business efficiency contribution

Operating income per int. FTE, USD thousand

Revenue growth contribution

IT share of cost, %

0 5 10 15 20

90

80

70

60

50

IT spend per int. FTE, USD thousand

Top performers spend less on IT and keep their business

expenses low

Top performers generate more income while spending

less for their internal FTEs

0 20 40 60 80

600

500

400

300

200

100


For too long, wealth managers have put off the long-overdue

modernization of their core IT platforms

Older core IT platforms cause much higher operating costs

Source: EY analysis1 Age of the oldest installed application of the core IT system

More than 10 yearsLess than 10 years

years

IT cost-income ratio

IT share of cost

Age of core IT platform1

1.4x

6.78.6

9.412.0


Cybersecurity is still largely neglected by wealth managers

Source: EY analysis

Compliance is still seen as far more important than risk reduction despite the increasing frequency and severity

of cyberattacks

Which of these strategic business priorities is IT expected to have the most

impact on?


Regulatory compliance

Revenue growth and

protection

80

57

Operational efficiency and

improvement

53Risk reduction

(e.g., cybersecurity)

53


Thank You

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