Preface. Happy Reading! AshokVemuri

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2 Preface Hearty greetings from the Infosys Banking & Capital Markets team. On behalf of Infosys, I am delighted to present the first issue of our journal FINsights, a compendium of articles, which bring you insights into the technology powering the financial services business The aim of the journal is to bring you the latest in technology, applied to your business scenarios, which will enable you to win in today s flattening business world. The first issue of FINsights focuses on the wealth management industry; an industry which is grappling with multiple challenges. An increasingly demanding and informed customer base, a challenging compliance environment and the jostling for a customer centric trust based role amongst trust banks, brokerages, insurance companies and family offices make for a very challenging business environment. This journal has a set of articles which look at these and other unique characteristics of the wealth management industry and I hope that they will not only make for enjoyable reading, but also help you in addressing some of your vexing business challenges. I would like to thank all the contributors from Infosys Banking & Capital Markets group and also Alois Pirker from Aite group and Matthew Bienfang from TowerGroup for their insightful articles. I hope you will enjoy reading these articles as much as we have enjoyed putting them together. Please do not hesitate to get in touch with me in case you have any queries or comments. I look forward to your feedback and suggestions in making FINsights a relevant and topical journal. Happy Reading! AshokVemuri SeniorVice President and Head - Banking & Capital Markets Group Infosys Technologies Limited

3 Contents Preface From the Editors Desk 04 Business Challenges and Technology Priorities for Wealth Management Ashok Vemuri 10 Integrated Advisor Workstation A Roadmap Merlyn Mitra Anand Bhushan 19 Case Study: NextGen Client Data Aggregation and Reporting Ashwin Roongta 23 The Role of Open Architecture Emmanuel Chesnais 27 Managed Products - A Strategic Transformation Framework Mak Datar Sanjay Taneja Rajeev Nayar 34 Holistic Wealth Management and the Unified Household Alois Pirker 39 Achieving Client Centricity via Customer Data Integration Sai Kishan Alapati Ashwin Roongta 45 Product Repository: The Foundation for Successful Open Product Architecture Sai Kishan Alapati Anita Stephen 49 Removing Glitches in On-Boarding the Wealthy Muthukumar Krishnan Sujata Banerjee Bharat Rao 55 KYC Compliance - A Strategic Approach Rajesh Menon 59 Analyst Perspectives - Q&A with TowerGroup Matthew Bienfang

4 FINsights Editorial Board From The Editors Desk Balaji Yellavalli Associate Vice President Banking & Capital Markets Group Bhuvaneswari Sundaram Associate Vice President Banking & Capital Markets Group Jonathan Stauber Vice President Banking & Capital Markets Group Lars Skari Practice Leader Banking & Capital Markets Infosys Consulting Manish Jha Engagement Manager Banking & Capital Markets Group Mohit Joshi Chief Executive Officer Infosys Technologies S. De RL De CV The wealth management industry is changing rapidly to meet the evolving needs of its participants. This is one area where true financial services convergence seems to be happening as trust & private banks, brokerages and retirement planning focused companies are all trying to get a bigger slice of the action. Opportunities in new geographies and asset classes are driving a lot of the change in the industry today. These will lead to increased investments in the core processing platforms, as well as the need to tie the various platforms together. The need to bring systems together is very important to financial services firms from a financial planning & advice, customer data, client service and a Business Intelligence (BI) & reporting perspective. Open architecture is another very important consideration that is driving changes to the way the banks service clients. Further, the need to offer clients a wide bouquet of products is driving consolidation of information across the different products and asset classes. Changes in banker and advisor team structures as well as client segmentation for servicing will lead to better cost structures. All of the above have technology implications for banks. Technology will need to be aligned with business to meet the needs of an agile organization that can respond rapidly to changing business circumstances. Technology itself is evolving rapidly and can sometimes drive changes in the organization through the ability to deliver more than what was hitherto considered possible. Information Technology (IT) organizations that are able to plan and react early, and then execute well on these changes are the ones that will succeed in meeting the needs of their business. We are happy that this book addresses some of the biggest business challenges and technology implications addressing wealth management firms today. The debate on some of these topics is very timely. We hope that the journal will inform you and enable you to formulate a response to the many challenges facing our industry. We look forward to your feedback. Happy Reading! Balaji Yellavalli & Manish Jha Editors

5 Integrated Advisor Workstation A Roadmap Financial Advisory firms are extensive users of technology. However, the current set of applications/ tools has many data and workflow gaps. Most of these gaps can be resolved by integrating data and applications under the Advisor workstation umbrella. This can have significant benefits in terms of enhanced client service, more efficient operations, improved compliance and higher advisor retention. Anand Bhushan Senior Associate Infosys Technologies Limited Merlyn Mitra Senior Associate Infosys Technologies Limited 10

6 Financial Advisory firms aspire to provide a rewarding, long-term and high-quality client experience while enhancing operational efficiency, advisor productivity and retaining their high performing advisors. This necessitates providing advisors with tools to develop superior client relationships, improve operational processes and increase business. In today s environment, an Advisor workstation is possibly the most widely used technology tool and it plays a vital role in helping firms and advisors attain their goals. In this paper, we will analyze the current gaps in advisor technology with a focus on Advisor workstation, and subsequently review possible techniques to reduce those gaps. The Advisory Process The financial advisory industry is extremely diverse with independent advisors competing with large firms for customers ranging from retail individuals to family offices. Consequently, the firms employ different strategies to acquire and service clients. However, the basic process for providing advice remains the same with few differences. The advisory process starting from finding to servicing a client can be broadly defined as seen here. Fig 1: The Advisory process overview Find Client Possibly, the most important and challenging phase of the advisory process is finding a client. In the classic setup of a large investment advisory firm, the advisor would be working in conjunction with the marketing department to acquire clients. As illustrated in the following diagram the two key tools being used by Advisors are contact management and lead management systems. Usually, these two systems are separate with limited to no integration, leading to many co-ordination challenges. Fig 2: The objective of find client process is to setup an initial meeting with a client 11

7 Understand Client Following the setup of client meeting, the next step is for the Advisor to meet and understand client s financial needs, and complete the initial account opening process. Some commonly occurring gaps include: Lack of a standard, structured mechanism for capturing client risk profile Know Your Customer (KYC) monitoring is an independent, manual and detached set of activities. Additionally, firms are facing increased regulatory pressures to improve KYC and Anti-money Laundering (AML) processes. While, this may not be the primary responsibility of an Advisor, it is very important for the firm supporting the advisor. Today, only a handful of firms have a structured KYC framework. Due-diligence & supervision is a mandatory process, but most often it is conducted post facto rather than as an ongoing and integrated set of activities. Fig 3: Key tasks in understanding a client Propose Plan Having gathered the required client information, the Advisor can now make use of financial planning tools to develop a financial plan for the client. While, most firms have multiple, advanced and sophisticated financial planning systems, few have been able to integrate these into one comprehensive platform. Some commonly observed gaps include: Planning tools are typically siloed applications with no automated link to either illustration tools or existing account information Advisor has to manually key in information for all existing client accounts (including third party accounts) Plan output is generated from different tools and is disjointed, and has an inconsistent look and feel The financial plan is not integrated with portfolio management tool. Fig 4: Preparing a proposed financial plan often involves combining output from multiple, specialized planning tools 12

8 Execute Plan Once, the client and advisor have agreed upon a plan, the next phase entails putting the plan into action. This involves Advisor or her assistant working with the client and coordinating with the Firm s operations group to complete the paperwork. Some commonly observed gaps include: Identification of correct form(s) is difficult due to frequent updates and large universe of forms Incorrect identification of form leads to significant rework Often times a firm has multiple account opening interfaces with product specific account opening procedures, forms, disclosures, eligibility criteria etc. Consequently, client information has to be re-keyed or rewritten multiple times Client has to sign multiple forms many times Mail and wait account opening makes it very difficult for financial advisors and client to track and resolve any issues. Fig 5: Multiple account opening application interfaces can make executing even a simple plan quiet onerous for both advisor and client Report and Review One of the key aspects of servicing is providing regular and timely reports to the client. Moreover, an on-going financial planning relationship also involves regular review and update of client s financial plan. Figure 6: Multiple reporting interfaces often limit advisor s ability to promptly produce up-to date, consolidated reports for their clients 13

9 Some commonly observed gaps include: Client receives multiple statements instead of a single, consolidated and comprehensive statement Client information has to be manually consolidated from different systems Client reports are inconsistent firm-wide, and may not look professional Limited options for reporting across accounts (e.g. asset allocation across all accounts) and to group multiple accounts for reporting No automated or efficient process for comparing financial status with plan Client life event / profile changes do not automatically alert advisor Re-balancing of portfolio requires entering multiple transactions in various systems. A review of the gaps reveals that most of these are due to non-integration of client data from different sources combined with inability of different tools to work together in unison. Most of these gaps are either a data or a workflow gap, or both. Gaps due to Technology In addition to these, there are a few gaps which have arisen due to technology and its usage, such as: Typical advisors use more than half a dozen different technology tools to conduct their business (in few cases, the number of advisor-accessed applications exceeded two dozen). Because each application has a unique password, set of password rules (e.g. expiration time limit, length), user provisioning, et cetera, the use of so many applications leads to considerable user annoyance and can often be a big security risk Often, there is no common way of identifying clients across the various applications. This leads to extra effort in searching for a particular client in every application Not having a single system of records leads to different systems reporting the same information differently. Many financial firms have already recognized these gaps, and are in the process of taking the necessary steps to correct them. In our experience as technology partners to leading financial institutions, we have observed that lately, firms are focusing their efforts on: Developing a comprehensive, consolidated and customizable reporting solutions Investing in an easy to use, advanced and online self service application and good call center technology for small account (the definition of small account will vary based on the firm) or clients with lower investible assets Enhancing the existing systems to support alternative, non-usd denominated assets Developing an enterprise level client data manager which is a storehouse of all client profile data and all existing relationships with the firm Implementing Single Sign-on and identity management systems to streamline user access and provisioning In the Industry: Any analysis of current gaps is incomplete without looking at the industry. While an in-depth review of industry trends and drivers is outside the scope of this paper, below are some of the key drivers impacting the industry. Clients are looking for comprehensive financial advice with multiple planning horizons and goals (such as financial advice to generate a collection of financial plans focused on college funding, health care, retirement planning, et cetera) Increased regulatory focus on KYC processes, advisor certifications and suitability necessitates a pro-active and all-inclusive approach to compliance Firms are providing nontraditional and alternative assets to clients with lower asset level. Highly specialized products are often introduced, focused on a very small client segment Demand for specialized financial advice is increasing; at the same time, clients want advanced performance reporting to review their portfolio performance and advisor effectiveness Firms are looking to transfer some of compliance related responsibility from the independent & centralized compliance departments to front office staff Increased usage of PDAs and mobile devices fueling the need for Wireless Access Protocol (WAP) enabled applications. Features of a New Workstation As mentioned earlier, the key gaps handicapping advisors are lack of integrated client information and wellorchestrated set of applications. Both of these challenges are fairly daunting for a firm, which has already made significant investments in advisor tool sets. In addition 14

10 to this, firms are often burdened with multiple historical client databases, which are jerry rigged to perform together. Given this situation, we generally advise our clients to take small, measured and planned steps following a medium- to long-term technology roadmap. The roadmap or plan adopted by a firm will be determined by a combination of factors including business goals and drivers, existing technology ecosystem, technology budget etc. For instance it is possible that an established firm focusing on a large number of mass-affluent clients could have a greater need for an automated account opening solution in comparison to a centralized reporting interface. On the other hand, a firm focused on few, high net worth clients will achieve more benefits from a single, consolidated and comprehensive reporting interface than an automated account opening system. scratch or buy a new one. Other approaches could involve rolling out a series of enhancements to its existing workstation. In either of these scenarios, the workstation would comprise of a similar set of components and/or applications. Components of New Workstation. The workstation should aim to provide easier, faster and centralized access to all relevant tools and information. At a minimum, the workstation should have: A single password for accessing all tools The capability for users to customize and personalize the dashboard. Considering that many advisors have assistants and support staff, the advisor dashboard should allow for different levels of access A professionally designed user interface Fig 7: The key to the workstation of future is integration. One of the ways to define a future workstation is to identify its features and functionalities. The figure above identifies the various features which are required from a workstation at different stages of the sales process. There are a number of possible ways for firms to develop a workstation which satisfies these requirements. For instance, a firm may opt for a complete redesign of the workstation, and choose to build an application from There are eight key components in the advisor workstation: Leads and Contact System In a typical setup, leads are generated by either the marketing department (these are subsequently distributed to advisors) or directly by the advisor. A lead management system essentially helps track and manage these leads. More often than not, it is not integrated to either contact management or client profile database. A 15

11 lead management system in silo requires the advisor to work his way through various systems, combined with manual processing, to track leads and setup meetings. This not only takes more time but can also induce errors. We recommend that in addition to standard lead and contact management system capabilities, the integrated system should: Integrate leads management with contact management system: This integration allows for better lead management as well as more efficient calendar and contact management. The advisor should have the ability to enter self-generated leads, and be able to manage all leads through a single interface Track lead usage and prompt advisors accordingly: The system should alert the advisor of not acted upon leads. If a lead is not required by a specific advisor, it should be redistributed Help monitor advisor productivity: The system should provide the marketing department of the firm with up to date analysis of leads and their usage. This will help marketing department in measuring the efficacy of various promotional campaigns as well as monitoring advisor productivity in leads conversion. This also encourages pro-active behavior on part of advisors Populate lead with client / prospect information: All prospect / client information (including past advisor relationships, past meetings, et cetera.) should flow with the lead. Providing access to prospect / client information along with the lead, not only provides access to all the required client information in an accurate and timely manner, it also equips advisors to understand their client needs better and increases cross-sell opportunities Allow for leads and prospect information to be accessible through PDAs, mobile devices, et cetera. Client Profile Database The central component of an advisor workstation is a comprehensive client profile database. It is the basis on which other components such as Unified account opening and centralized reporting can be built. Given the increased competition, advisors are expected to exceed the expectations of existing customers while still maintaining a good rate of new client acquisition. The advisor should therefore understand the needs of his existing customers and potential customers better than competing firms. He can then leverage this knowledge to create a consistent client experience that is beyond reproach and ultimately secure a higher proportion of each individual client s assets available for management. A client profile database should: Be a centralized and comprehensive system of record for all client profile information: The database should consolidate all relevant client information from disparate or linked systems and create a profile. All client information collected in the sales process should be entered in the database Enable a full and uniform view of a client in its entirety: An advisor should be able to print a client dossier which contains a client s financial goals, plans, assets, meetings planned, et cetera. This requires that all supporting systems (such as portfolio management, financial planning) are able to refer to the client uniquely. KYC tool The responsibility to ensure adherence to Know your customer guidelines lies with the financial institution and not the Advisor. Penalties for non-compliance can be severe and include large fines. However, the onus for gathering client information and relaying it to KYC group in the firm lies with the Advisor. It is typically an iterative and manual process with frequent information exchange between Advisor & KYC compliance group. A KYC tool should: Have a structured framework to capture client data: This ensures consistency and can reduce lead times in performing the KYC check Enable KYC checks to be an automated and ongoing activity, instead of a one-time check done during the account opening process Be part of client profile database: This will facilitate automated KYC checks based on updates of prespecified profile information Have basic data integration with Advisor workstation to enable coordination of data gathering and the initial KYC check. Unified Account Opening Tool A necessary step in starting any relationship is account opening. It is fairly common for a typical client relationship to involve multiple products. Very often these products have individualized and different application processes. This induces time lag and operational risk, leading to a more time-consuming account opening process, which 16

12 can reduce up-sell and cross-sell opportunities to existing clients. A well-structured, unified account opening process can help ease the stress of account opening. A unified account opening tool should: Automatically identify correct forms based on selection in financial plan: The tool should have an easy to use wizard which selects the correct forms based on the financial plan for the client. Additionally, the tool should have a user friendly interface to help the advisor identify the right form Pre-fill all existing client information: Any information that has already been entered should not have to be entered again. The tool should allow both the advisor and the client to complete the forms online Allow for multi-channel account opening Have a customizable and extensible workflow approach. Financial Planning and Portfolio Management Tools The most fundamental role played by an advisor is providing financial advice. Advisors make use of many different tools to prepare the best advice for their clients. For instance, illustration tools are used for analyzing life insurance, annuity, et cetera. Asset allocation tools are used to determine the optimal asset allocation. Portfolio management tools are used to maintain the client portfolio and ensure that it is functioning in accordance with the financial plan. These tools typically provide features such as scenario and sensitivity analysis of the existing client portfolio. The benefits from these tools can be greatly enhanced by: Incorporating plan wizard functionality, which, integrates all the planning tools: The plan wizard should facilitate a step-wise approach to financial plans. This helps ensure standardization and completeness in financial plans. Based upon client goals, financial positions, and risk profile, the wizard should make a determination of the recommended set of planning tools. It should automatically prepopulate the planning tools with any data that exists in the client profile database, thereby reducing the manual steps required for creating a plan. Integration of financial planning tools output into portfolio management tools: This would allow the advisor to track the portfolio automatically against the plan. It would encourage advisors to monitor the plan closely, and perform more frequent reviews. Extending this further, the advisor should be able to set up alerts based on the performance and plan goals. It also allows the client to see how the portfolio is measuring up against the financial plan. Integrating financial plan with client profile data: The planning tools should automatically gather data from client profile and other sources, thereby reducing the manual effort of re-keying the client information. Data Aggregator Internal and External Data A holistic view of client financial assets is important not only for providing the best financial advice but also for cross-selling. An advisor workstation can help advisors better service their clients and increase sales by: Aggregating clients data across the internal products: The first step towards data aggregation should be to aggregate all of the clients data within the firm. This is an extension to developing a client profile database and a pre-requisite to having a consolidated client view across the firm. Aggregating clients data across external financial institutions: The next step towards data aggregation should be to aggregate all of the clients data across various financial institutions. This not only enables the advisor to provide better financial advice, but also allows for ongoing monitoring of the clients overall financial net worth. This results in increased cross-sell opportunities and may also help in better adherence to KYC guidelines. Unified Order Initiation Platform Firms typically offer a number of financial products to their clients. Very often these products are operated and managed by the firm in silos leading to non-integrated systems. Having a unified order initiation platform coupled with an easy to use product repository can greatly enhance the efficiency of entering transactions and monitoring status. Such a platform should: Have a unified, intuitive and customizable graphical user interface (GUI) Be a one-place for all initiating and monitoring transactions across all the firm s products Perform first level (initial) validations before the transaction is sent to product systems. 17

13 Centralized Reporting Interface As clients become more sophisticated, they demand on-time and focused reports. At the same time, it is not uncommon to find that even large wealth management firms have rather limited options when it comes to just that. A consolidated, comprehensive and unified reporting solution can greatly enhance the value offering of an advisory firm. Such a solution should be: Able to generate wide variety of reports without the advisor having to go to different applications: Different clients have different needs with regards to the type of report they would like to see, from simple account balance and net worth to complicated attribution analysis. An advisor should be able to generate such reports automatically with ease (and should not have to export data in Excel and PowerPoint) Customizable and personalized: The advisor should be able to select, customize and define the parameters for a collection of reports and identify them as my favorites. This would allow each advisor to have the most commonly requested reports easily available Able to generate consolidated reports with data across all accounts and groups of accounts: Examples of such reports could include total assets with the firm, total equity holdings across all accounts, et cetera. This raises the level of client servicing and helps the advisors with a consolidated performance view at an aggregated level, thereby aiding them to provide a more constructive review process. Able to generate reports which have a consistent and professional look and feel. Toward a New Workstation In conclusion, we would like to reiterate that the key to a good advisor workstation is integration of data and a well-orchestrated set of technology components. This is no small task and is best carried out by first defining a roadmap and then undertaking a series of small and coordinated projects to attain this goal. The core components, such as a unified client profile database, should be among the first to be built and be designed to allow for expandability and flexibility. In addition to providing new and advanced features, the workstation should have well-defined information architecture, which promotes greater adoption and usage. Anand Bhushan Senior Associate Infosys Technologies Limited Anand is a Senior Associate with Infosys Banking & Capital Markets practice. He has over 7 years of experience working with clients in the wealth management, family office and retail investment management industry. He has managed and participated in a variety of projects to define technology strategy and plan, optimize business processes, identify operational improvements and develop business architecture for complex technology initiatives. Merlyn Mitra Senior Associate Infosys Technologies Limited Merlyn is a Senior Associate with Infosys Banking and Capital Markets practice. She has over 9 years of experience in the Capital Markets and securities industry with expertise in trading, clearing, settlement, asset management & compliance. 18

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