EY Wealth Management Platform Market Survey 2014

EY Wealth Management Platform Market Survey 2014

Table of contents Introduction 3 Respondent profile 4 Executive summary 5 Strategic needs and initiatives 6 Outsourcing 9 Wealth s adoption of outsourced technology 12 Regulatory landscape 17 2 EY Wealth Management Platform Market Survey 2014

Introduction For our latest survey on wealth servicing platforms, we interviewed chief operating officers (COOs); chief technology officers (CTOs); chief finance officers (CFOs); and heads of technology, operations or business in wealth business units of 13 wealth firms and private banks across the United States. Our aim was to gather insights from these industry leaders, who not only can affect and influence boardroom decisions on long-term vision and strategies of their firms, but also influence a secondary market of wealth business solution providers that perform specialized functions for these firms, such as reporting, trade order, asset servicing, research or investment. Our survey focused on these specific areas: What are the current and future strategic needs and initiatives of wealth firms in the US? How do these firms look at outsourcing (operations and technology) for meeting their strategic goals? What are the drivers and inhibitors to outsource their technology and operations? How are they adopting outsourced technology platforms in the wealth business? What is the impact of the regulatory landscape on outsourcing in particular, and on wealth operations and technology infrastructure in general? Banks are constantly evaluating their business models; front-, middleand back-office operations; and their technology stack to deliver more (a wider range of financial products and services) and deliver better (through various distribution channels and improved client touch points) to their clients. Such initiatives include the following: 1. Deliver the bank and not just a particular line of product or business. For example, private banking solutions could include commercial banking solutions, such as credit card services, as well as wealth solutions, such as estate planning, trust services, brokerage and insurance. Are the banks consolidating their business functions (technology and operations) across multiple lines of business to gain operational efficiencies? 2. Focus on core business capabilities while shedding or outsourcing non-core activities. Firms have set their eyes on building a revenue model around their core competencies and a targeted client segment. Some firms have private client services to cater to the high-net-worth (HNW) clients, while some are focusing on a mass affluent market. Banks are looking to augment fee-based services, such as advisory services, goals-based planning and portfolio, while outsourcing non-core functions, including Customer Relationship Manager/Management (CRM), research, risk and compliance, and back-office functions, including client and regulatory reporting, reconciliation, settlements, fee billing and tax services. How are they looking to achieve this strategic shift and alignment? 3. Use of technology (mobility). Banks recognize that technology is evolving much more rapidly now compared to a few years ago, and mobility is no exception. The emergence of low-cost, open-source tools and widespread mobile coverage means customers, advisors and portfolio managers want more data and services delivered to them through their handheld devices. Wealth and asset firms recognize that it is increasingly harder to keep pace with technology. How do they mitigate this risk around obsolescence and path-breaking innovations? Are they more willing to buy rather than build or is technology not such a key criterion in the wealth space? 4. Integrated or best-of-breed solutions. As these firms buy more dedicated solutions (best of breed) and assimilate them into their existing infrastructure, do they face data quality or integration issues? Would they rather go for integrated platforms to support their breadth of business functions and circumvent the problems of data and integration? How do they weigh infrastructural stability, operational efficiency and best-of-breed capabilities? 5. Regulatory landscape and outsourcing. How are cloud services impacting wealth businesses and infrastructures? With increased scrutiny around information security and regulatory compliance, are firms pushed toward more insourcing or adopting solutions hosted inside their firewalls, or are they still amenable to outsourced services delivered through the cloud? We hope this survey provides insights and clarity around these questions. EY Wealth Management Platform Market Survey 2014 3

Respondent profile For this survey, we interviewed 17 industry leaders (CTOs, CFOs, COOs and heads of business and operations) from 13 wealth firms and private banks. These firms varied in size (total assets, assets under administration and ), geographical areas of operations (number of states they operated in or number of branches) and even target market segment (from mass affluent or HNW to ultra HNW). In order to avoid a selection bias and a high standard deviation, a number of criteria were used for categorization. We finally settled on assets under (AUM) under wealth businesses. This gave us a good dispersion across categories with relatively lower standard deviation. Firm profile By AUM under wealth business (in $ billions) Category # of respondents AUM < $50 (small) 6 $50 < AUM < $150 (medium) 3 AUM > $150 (large) 4 Grand total 13 The following is the coverage of executives within the various sizes of firms covered in the survey (size is by wealth AUM). Spread of executive roles within firms Large (AUM > $150) 5 Business 1 Operations 1 Technology 3 Medium ($50 < AUM < $150) 6 Business 3 Operations 1 Technology 2 Small (AUM < $50) 6 Business 1 Operations 4 Technology 1 Grand total 17 Executive profiles For the 17 executives who we interviewed, the following is the respondent profile based on the organizational division that they represented. Organizational division Count Business 5 Operations 6 Technology 6 Grand total 17 4 EY Wealth Management Platform Market Survey 2014

Executive summary The industry leaders are indeed re-evaluating their operating and growth strategies. The survey reaffirms that technology and outsourcing are still key considerations toward achieving their growth agendas and targets. Here are some of the key findings of our survey. The future is advisory. The crisis had undermined the credibility of the financial analyst, but as clients realize that managing money by themselves is still riskier, the emphasis on advisory is back. Clients demand and firms realize that advisory has to improve significantly. Fee-based services and managed accounts are major sources of revenue streams and more so for HNW clients. Firms are spending to improve their advisory platforms and related client and advisor touch points. They are also looking to improve the investment process, moving away from the modeled investment approach and preparing to provide investment discretion (more guided than modeled) to their clients. Some of the top initiatives of wealth firms over the next one to three years are client and advisor experience, investment, goalsbased planning, and digital and mobile strategies. Everyone outsources (more technology than operations). All firms interviewed in this survey outsource for an improved bottom line (reduced cost) or to free up capital or shed non-core activity. Technology outsourcing is more common than operations outsourcing (or, Application Service Provider is a more preferred delivery model of outsourced solutions than BSP). Smaller firms (AUM < $50 billion) have had a better experience with outsourcing than the bigger firms. Technology platform (buy rather than build). The pace of change and innovation in technology is unprecedented, and firms are finding it increasingly difficult to keep up. Technology is increasingly being considered a hindrance rather than an enabler for business. Smaller firms (AUM < $50 billion) are more nimble and agile in keeping up with technological changes, while the larger firms (AUM > $150 billion) find more of their technology stack as legacy or outdated. Firms are now more willing to buy (invest in new) rather than build new technology solutions and capabilities. Cost and obsolescence are the primary drivers to invest in new solutions and platforms. Outsourced solutions or insourced solutions. Small firms (AUM < $50 billion) are open to outsourced solutions across a wider range of wealth business functions (e.g., investing, advisory, relationship, product, investment processing), while larger firms are more likely to keep these insourced (they prefer to buy and customize or maintain their homegrown solutions). Investing is ranked highest in terms of suitability for an outsourced solution. Best-of-breed solutions over an integrated platform. Firms overwhelmingly prefer best-of-breed solutions to an integrated wealth platform. While isolated best-of-breed solutions do perpetuate integration and data quality issues, firms are willing to take the risk. Firms are looking for flexibility to integrate or add on specialized or other enterprise solutions. An integrated solution seems more like a dream scenario (a silver bullet for all stability and integration issues) that still doesn t exist. If it does, some feel it could not take up firms specialized needs or it would entail a heavy initial investment that firms mostly do not have an appetite for or don t see a value proposition. The regulatory landscape will spur outsourcing. Client reporting and portfolio appear to be feeling the most regulatory pressures. Regulatory spending is not going to go down in the future. Opinions are evenly split if it will go up further or stagnate. Much like the pace of change in technology, the pace of change in regulatory and compliance mandates is going to spur outsourcing. Rather than constantly evaluate or change their systems for compliance, firms see outsourcing as a way of sharing the risk. They are looking for a partner that is equally vested in security and compliance, is prompt and is reactive to new mandates and regulations. EY Wealth Management Platform Market Survey 2014 5

What are the current and future strategic needs and initiatives of wealth firms in the US? Advisory was identified as a key growth area by all firms Within banking, security-based lending and card services were identified as expected high-growth areas. growth areas highlighted by firms included asset. Advisory includes fee-based advisory services as well as roboadvisors. What are the areas of wealth that you expect the most growth from in the next three to five years? Insurance Brokerage Banking Trust Advisory 0 2 4 6 8 10 12 14 We would look at vendors for brokerage. We see a lot of growth in this area. (Vice chairman, small bank) [We are moving] from [being] product centric to solution centric [organization]. Noticing growth particularly in the affluent market 12% - 15% CAGR. [Clients with] $1 Million - $3 Million is the sweet spot. [They are] looking at holistic planning. (CTO, midsize bank) What percentage of your capital budget is focused on strategic needs vs. maintenance or tactical projects? Expect advisory to have the most growth followed by banking. Over half of their client account types are feebased managed solutions. Clients are looking more for a value proposition from their advisors. (CTO, midsize bank) 49% 51% Strategic spend Spend Tactical spend Spend Strategic versus tactical spend of capital budget was fairly even across firms, with strategic only slightly higher than tactical. 6 EY Wealth Management Platform Market Survey 2014

Client and advisor experience and investment are top strategic initiatives Client and advisor experience and investment emerged as top strategic initiatives and areas of spend. responses included targeting the recipients of firstgeneration wealth transfer, as well as driving merger and acquisition activities. What are the areas of wealth that you expect the most growth from in the next three to five years? Enhancing product offerings Asset servicing Compliance Data Data strategy/predictive analytics Financial planning I think client onboarding is being impeded. Technology is behind here and contains massive manual work. Client servicing, e.g., e-signature forms. (CTO-wealth, midsize bank) More process improvement around portfolio. Systems that support that business. Example model and rebalancing. The technology that enables us to make investment decisions. (COO, small bank) Goals-based planning Digital/mobile strategy Investment Client Client/advisor and experience 0 2 4 6 8 10 12 14 Wealth organizational structure Are your wealth lines of business, e.g., investment, trust, brokerage, aligned under a common organizational structure? A number of small firms specified that their wealth lines of business are not aligned under a common organizational structure. All midsize firms that responded have aligned their wealth lines of business under a common organizational structure.... not consolidated, trust is in corporate, brokerage in institutional, revenue is split between front, middle and back office. (CIO, large bank) 9 8 7 6 5 4 3 2 1 0 Yes No EY Wealth Management Platform Market Survey 2014 7

Investment approach varies A single investment approach was not followed by the surveyed firms. Regardless of size, they all embraced model, guided and discretionary approaches. The model approach is the most common. Is your investment approach more focused on a model or guided portfolio approach, or are portfolio managers allowed to take discretion in selecting investment options? Most of the respondents mentioned that though they had a welldefined repository of models, some amount of discretion was allowed for flexibility. Want to provide more flexibility [to our clients] flexibility with asset class. I [as a client] want growth but I may not be interested in a particular asset class. The asset classes roll up to a model, and we want to provide more asset classes within the model. (CFO, midsize bank) Model Guided Discretion Client-segmented (fully managed based on the client segment) If investment discretion is permitted, to what degree is it allowed? Firms saw more discretion allowed in the future to accommodate specific needs of their clients (especially HNW clients). Limited Somewhat Complete 8 EY Wealth Management Platform Market Survey 2014

How do these firms look at outsourcing (operations and technology) for meeting their strategic goals? What are the drivers and inhibitors to outsource their technology and operations? All surveyed firms outsource All firms responded that they outsource some portion of their technology, operations or both. Most respondents agreed they would never outsource any functions that were client facing or client interacting. Several respondents indicated that although they outsource where necessary, they would prefer to remain in-house with operations and technology. Do you outsource operations, technology or both? 9 8 7 6 5 4 We would never outsource client servicing or client reporting; would potentially entertain middle and back office operations but not where there is client touch. (COO-wealth, large bank) Our firm does some outsourcing, where efficiency dictates, but we have a preference to stay in-house/onshore and ultimately own what we can do in-house. (COO-wealth, small bank) The rationale for outsourcing is that technology and operations are not the core competency of the firm. (COO PWM, midsize bank) 3 2 1 0 Operations Technology Both EY Wealth Management Platform Market Survey 2014 9

Technology outsourcing more prevalent Practice Management More firms outsource technology than operations. Product Management The only area not outsourced today in any manner was practice Client Servicing servicing (vendor, compensation, Research service level agreement tracking). Financial Financial Management and administration and Admin None of the firms surveyed outsource all of their wealth Reporting processing and technology with a single BSP. New Account account Opening opening integration [capabilities] is a critical component because of legacy enterprise systems. (COO-wealth, small firm) reduction in internal control may impact client service. (Vice chairman, small bank) You shift the responsibility to third parties but you lose some control over it. That s the dynamic that we are struggling with. (CTO, welath, midsize Bank) Which areas of your business are outsourced today, from both an operations and a technology perspective? Planning Asset Servicing servicing Client Reporting reporting Cash Management Portfolio Management CRM Portfolio Accounting accounting Trade Order order Management 0 2 4 6 8 10 12 14 Technology Operations Decision to outsource cost is still the key driver Improving bottom line was cited as the top reason for outsourcing by firms under $150b AUM. reasons for outsourcing were speed to market and reducing complexity. but if it puts us at strategic disadvantage, no outsourcing. (COO, small bank) Whether technology or operations, respondents overwhelmingly chose cost reduction as the key business driver for making a decision to outsource. We are starting to peel away at some of the technologies and only outsourcing to firms that are focused on specific areas. (COO-wealth, small firm) Quality is key it s not just a labor move. (CTO, large bank) Outsource providers seem to be very good at day-to-day operations, but not so good on technology. (COO, small bank) Do you see outsourcing as a way to improve your firm s bottom line, reduce risk or free up capital? 8 7 6 5 4 3 2 1 0 Improve bottom line Reduce risk Free up capital for higher value or revenue generation generative areas What would be (or are) the top business drivers for making a decision to outsource technology operations? * Shed non-core noncore activities Scale and automation Data consolidation Cost reduction Risk and Compliance compliance Upgrading technology 0 2 4 6 8 10 12 < $50b $50b $150b > $150B * e.g., access to new technology, related vendor expertise 10 EY Wealth Management Platform Market Survey 2014

Wealth capability areas best suited for outsourcing Respondents were clear about not outsourcing any client-facing business functions. areas considered for outsourcing are trust and mobility. None of the firms surveyed indicated they outsource completely with a BSP. I believe mobility is well suited for outsourcing we simply don t have the capability ourselves. (Head of correspondent and advisor services, midsize bank) Probably areas where we are not using proprietary systems today it all comes down to reputational risk. (COO, small bank) Could consider anything but client touching or client impacting functions. (COO-wealth, large bank) We would look to outsource unique things that we don t necessarily have core competencies in (Head of corporate strategy, midsize bank) Whether you outsource today or not, which areas of your business do you think are best suited to business process outsourcing? Advisory Practice development Development Client onboarding On-boarding Relationship Management Investing Product Servicing Investment processing Processing 0 2 4 6 8 10 Mixed experience with outsourcing None of the respondents felt their current experience with outsourcing, at any AUM level, was excellent. All firms under $50b had good experiences with outsourcing, whether operations or technology. Managing multiple vendors is becoming very difficult. (COO wealth, small bank) Outsourcing gets the job done. The technology from outside vendors is adequate. (COO-wealth, midsize bank) If you do outsource, what has your experience been like with outsourcing operations? Excellent Good Fair Poor < $50B $50b $50B $50b $150b - $150B > $150B $150b If you do outsource, what has your experience been like with outsourcing technology? Depends on the vendor some are not well capitalized so pose significant risk to us when we roll out; other cases it s worked very well. (Business development lead-wealth, midsize bank) Excellent Good Fair Poor < $50B $50b $50B $50b $150b - $150B > $150B $150b EY Wealth Management Platform Market Survey 2014 11

How are they adopting outsourced technology platforms in the wealth business? Technology organization model enabler or hindrance? Smaller firms do not have a dedicated wealth technology organization and feel that their technology platform is a hindrance to the business. An overwhelming majority of firms consider their wealth technology stack a hindrance to their business. Is your technology organization fully dedicated to the wealth business, or part of the larger organizational infrastructure (a hybrid)? Hybrid Dedicated 0 2 4 6 8 10 12 We don t have a technology organization dedicated to our wealth asset business. (COO, small bank) There is a perception that it is a hindrance outdated and less reactive, but it really scales well and is an enabler. (CTO wealth, midsize bank) Many respondents cited other hindrances, such as infrastructure stability and lack of competitive and reliable technology platforms. Is your current wealth technology platform perceived as an enabler or a hindrance to business? Hindrance - other Hindrance - outdated and less reactive Enabler - other Enabler - scales well Enabler - easy to add products and Enabler easy to add solutions products and solutions 12 EY Wealth Management Platform Market Survey 2014

Firms prefer to buy (invest in new) rather than build All respondents agreed that a portion of their wealth applications were outdated to some degree. Few large and medium firms plan to maintain their legacy applications rather than invest in new or build proprietary solutions. We look at all [options]. We often look at investing in new and re-platforming legacy systems that are in-house. (CIO, midsize bank) What percentage of your wealth applications would you consider legacy or outdated? 5 4 3 2 1 0 0 0% 25% 25% 50% 50% 50% 75% 75% 100% 12 10 8 6 4 2 0 How do you handle legacy applications? Are you planning to maintain them, or invest in newer platforms? Build Invest in new Maintain Respondents cited rising costs, growth in business and growing obsolescence of their current platforms as the drivers to invest in newer platforms. The ability to access newer technology and capabilities was also cited as a reason to invest in new platforms. What are the drivers to invest in newer platforms? 12 10 8 6 4 2 0 Cost Growth Obsolescence Smaller firms more likely to support their wealth business with outsourced solutions What areas of your business would you consider using an outsourced solution for in the future, where you don t today? A significant proportion of small and medium firms are planning to use outsourced solutions across a wide range of business functions. Both large and small firms also indicated they would like to see an outsourced solution for data (category other in the graph). Investing is where most of the firms would like to see an outsourced solution. Key features [we] look for in a vendor are: functionality, ease of use, cost, capabilities and technology. (Vice chairman, small bank) Product Relationship Management Advisory Client On-boarding onboarding Investing Servicing Practice Development development Investment Processing processing * *e.g., planning and data EY Wealth Management Platform Market Survey 2014 13

Larger firms more likely to support their wealth business with insourced solutions What areas of your business will likely always be supported through insourced solutions? Most of the firms surveyed said that systems that interface with clients or have high touch points with them would likely be supported through in-house solutions, as that can be a differentiator. Large firms are more likely to use an insourced (external solution highly customized and integrated into their infrastructure or proprietary) solution. Anything client interfacing will be always supported through in-house solutions. (COO, midsize bank) I believe we should own technology infrastructure because we re an asset servicer and need 24/7 support. The savings I would get up front with outsourcing I would end up paying on the back end in support and servicing. However, if it were just for wealth, I would outsource the infrastructure component. (CTO, large bank) Product Relationship Management Advisory Client On-boarding onboarding Investing Servicing Practice Practice development Development < $50b $50b $150b > $150b Investment processing Processing A majority of firms prefer bestof-breed wealth solutions What is your firm s platform preference utilizing a fully integrated suite of applications built on a common infrastructure by a single provider or best-of-breed modular components? The firms that prefer fully integrated systems ultimately opt for best-of-breed unbundled components because: 25% They consider the entire enterprise and not just their wealth business. Fully integrated often lacks specialized processes that are unique to wealth (e.g., complex client structures and international hierarchies). 75% They are reluctant to overhaul and spend on implementing a fully integrated suite. Many have cited that the initial investment would outweigh the value proposition. Best of breed Fully integrated They prefer the capabilities of delivering a 360-degree view to the client (e.g., bank, brokerage, trust), but solutions don t necessarily have to be all in one. Fully Integrated integrated Componentized solution is adequate in meeting the current needs. If you are building a global wealth business, go with integrated solution. (COO, midsize bank) Any radical change [is only possible] when there is a strong business case. (COO, midsize bank) Best of of Breed breed I do not believe one solution can do it all we need the ability to tag on and/or append solutions as necessary. (COO, small bank) 0 2 4 6 8 10 12 14 14 EY Wealth Management Platform Market Survey 2014

Best-of-breed solutions are likely to perpetuate integration and data quality issues Eighty-seven percent of wealth firms admit to having data quality concerns across multiple lines of their businesses. All firms surveyed, regardless of size, support at least 20 distinct wealth solutions and, therefore, are prone to more data risks. Eighty percent of respondents have concerns that best-of-breed solutions would perpetuate issues with data storage and retrieval across lines of business. Do you have data quality issues across lines of business that utilize various support solutions? 13% Yes No Are you concerned that a componentized solution would cause or perpetuate issues with data storage and retrieval across lines of business? 20% Yes No Bad thing about best of breed [solutions] is the integration issue. It becomes a challenge to provide an integrated solution. User experience is [often] fragmented. (CTO, midsize bank) We prefer integrated but will choose best of breed. We are willing to take on data risks to get a better product (SVP, large bank) 87% 80% Unbundled components preferred for investing capabilities Which areas of the wealth architecture framework do you feel best-of-breed, unbundled solutions are necessary? A majority of respondents prefer to have unbundled solutions for investing. Most firms prefer solutions to be flexible enough to integrate best-of-breed, unbundled components. Practice Development development Investment Processing processing Servicing I do not believe an end-to-end solution for wealth would work and it doesn t really exist. The solutions need to have flexibility to integrate to other enterprise solutions cost and system capabilities are interdependent. (COO-wealth, small bank) Everywhere we think best of breed should be used, we are using best of breed; we are constantly re-evaluating our systems. (COO, small bank) Advisory Client On-boarding onboarding Relationship Management Product Investing 0 2 4 6 8 10 12 EY Wealth Management Platform Market Survey 2014 15

Competitive landscape SunGard was cited most often as an existing wealth platform provider by the respondents. A number of respondents did not rate the satisfaction level associated with their current vendors. vendors used by responding firms include Avaloq, Broadridge and LINEDATA. What technology providers are you using to support your wealth business today? 14 12 10 8 6 Looking at Envestnet for SMA account functionality. (Head of correspondent and advisor services, midsize bank) 4 2 0 Charles River Development getting their UMA functionality together. As vendors work on cloud offerings front and center, they need to ensure data privacy and financial service regulations are met. (CTO, large bank) SunGard Advent Fiserv Charles River Development FIS Thomson Reuters SEI Envestnet FolioDynamix Vestmark Citi OpenWealth Fi-Tek SS&C < $50b $50b $150b > $150B 16 EY Wealth Management Platform Market Survey 2014

What is the impact of the regulatory landscape on outsourcing in particular, and on wealth operations and technology infrastructure in general? Compliance and regulatory issues emerged as a major operational challenge Ensuring that Know Your Customer (KYC) and client onboarding documents remain in compliance with regulatory mandates were areas stated under regulatory issues. Business continuity and information security were common concerns. Some respondents mentioned that managing complexity due to the pace of change of business and rapid evolution of technology is a major challenge. Client-related issues spanning across marketing, branding, segmenting and servicing remained a challenge. Data and financial advisor productivity were also cited. What do you feel are your firm s major operational challenges for the next 12 to 24 months? 20% 20% 10% 20% 30% Regulatory Regulatory & and Compliance compliance issues Issues Managing Complexity complexity & and Technological technological change Data Management Client Issues issues FA Productivity productivity immense distraction associated with regulatory and compliance issues. (COO, midsize bank) Technology is lagging vs. market. Experience, efficiency of advisor, and client experience. (Head of corporate strategy wealth, midsize bank) Various platforms are driving different client experiences and potentially different investment recommendations. (COO-wealth, small bank) EY Wealth Management Platform Market Survey 2014 17

Regulatory pressure and change leading to greater application of outsourced solutions Do you see regulatory pressure and change leading to greater application of outsourced solutions in your business or reversing the outsourcing trend? An overwhelming majority of respondents believe regulatory pressure will lead to increased use of outsourced solutions. A small number of respondents are reluctant to relinquish control to third parties because it may pose a risk to maintaining a high level of client service. We can t keep up with all the changes so I think it would lead to more outsourcing. (COO, small bank) I do think it [regulatory pressure] leads to greater application of outsourced solutions, but providers have to get better at it; if they are building code around an outsource solution and not the core regulatory requirement, it makes it incredibly difficult to make changes. (COO, small bank) In our environment, we still own the responsibility; [outsourcing] increases the risk. We have direct accountability [toward our clients]. (CTO, midsize bank) 27.3% 72.7% Increase outsourcing Decrease outsourcing Regulatory spending is not coming down None of the respondents believed capital spending on regulatory compliance would go down in the next three to five years. Midsize firms believe spending will remain stagnant. What percent of your current capital spend is on regulatory or compliance issues? 25% 25% In which direction do you expect the regulatory spend to go in the next three to five years? Keeping up with the regulatory mandates is one of our operational challenges. (COO, small bank) 50% 50% 50% Respondents of larger firms have allocated over 30% of capital spending on regulatory compliance issues. Many of the larger firms expect to spend more on adhering to regulatory demands within the next five years. 00% 10% - 10% 20% - Above 20% Up Stagnate 18 EY Wealth Management Platform Market Survey 2014

Client reporting and portfolio bear the most regulatory pressure Firm respondents believe most business functions play a role in adhering to regulatory demands. Only large firms surveyed chose practice as a functional area with regulatory concerns. They [vendors] need to make sure that all [regulatory] components are installed and functioning before they are due. (COO, small bank) [There is a] lot of pressure regarding client disclosure, KYC. Regarding client risk profile, client documentation is a big issue. areas are vendor, information security and business continuity. (CTO, midsize bank) Fed starting to step in a lot more heavily on the vendor side ensuring due diligence of the vendors. (CTO, large bank) What functional areas of your business are of most concern to you from a regulatory perspective? Client Reporting reporting Portfolio Management Trade Order order Management Product Management Portfolio Accounting accounting New Account account Opening opening Client Servicing servicing CRM Reporting Planning Asset Servicing servicing Research Practice Management Financial Financial Management and Admin and administration Cash Management 0 1 2 3 4 5 6 7 8 9 EY wealth contacts Scott M. Becchi Partner Ernst & Young LLP Financial Services Advisory +1 212 773 4388 scott.becchi@ey.com Kelly J. Hynes Executive Director Ernst & Young LLP Financial Services Advisory +1 704 350 9046 kelly.hynes@ey.com Anil Kant Senior Manager Ernst & Young LLP Financial Services Advisory +1 212 773 6633 anil.kant@ey.com Charles Smith Senior Manager Ernst & Young LLP Financial Services Advisory +1 212 773 3518 charles.smith@ey.com Marcelo N. Fava Partner Ernst & Young LLP Financial Services Advisory +1 704 350 9124 marcelo.favo@ey.com Richard Hwang Executive Director Ernst & Young LLP Financial Services Advisory +1 215 448 3385 richard.hwang@ey.com Nalika Nanayakkara Partner Ernst & Young LLP Financial Services Advisory +1 212 773 1097 nalika.nanayakkara@ey.com Edward J. Tracy Partner Ernst & Young LLP Financial Services Advisory +1 212 773 6779 edward.tracy@ey.com EY Wealth Management Platform Market Survey 2014 19

EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US. EY is a leader in serving the global financial services marketplace Nearly 43,000 EY financial services professionals around the world provide integrated assurance, tax, transaction and advisory services to our asset, banking, capital markets and insurance clients. In the Americas, EY is the only public accounting organization with a separate business unit dedicated to the financial services marketplace. Created in 2000, the Americas Financial Services Office today includes more than 6,900 professionals at member firms in over 50 locations throughout the US, the Caribbean and Latin America. EY professionals in our financial services practices worldwide align with key global industry groups, including EY s Global Wealth & Asset Management Center, Global Banking & Capital Markets Center, Global Insurance Center and Global Private Equity Center, which act as hubs for sharing industry-focused knowledge on current and emerging trends and regulations in order to help our clients address key issues. Our practitioners span many disciplines and provide a well-rounded understanding of business issues and challenges, as well as integrated services to our clients. With a global presence and industry-focused advice, EY s financial services professionals provide high-quality assurance, tax, transaction and advisory services, including operations, process improvement, risk and technology, to financial services companies worldwide. 2014 Ernst & Young LLP. All Rights Reserved. SCORE no. CK0869 1410-1329329 NY ED None ey.com