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Compliance and Advisory Services Present Strong Opportunities in Private Banking & Investment Management

Odyssey Financial Technologies, a global provider of private wealth and asset management solutions and services, today revealed the key findings of its interactive roundtable session, Trends in Global Wealth Management: Strategies for Adapting to the Changing Requirements in Compliance and Service Delivery. Held in Barcelona as part of Odyssey’s eighth annual Wealth Management Conference, the session revealed the top business priorities for dealing with the dynamic wealth management environment.

More than 200 delegates attended the session representing tier one banks in the UK and Europe as well as leading financial institutions in Asia and the US. Audience members were invited to vote on a series of multiple choice questions about wealth management market growth, compliance and investment advisory business models. These were then explored by a panel of investment managers from ING Private Banking Geneva, CIBC Private Wealth Management Hong Kong, Morgan Stanley Private Wealth Management London, Bank Julius Baer & Co Zurich and Stanford Group Wealth Management Houston.

While more than half of the audience agreed that compliance could add value to their businesses, only 24% said they were fully ready for MiFID. Most roundtable participants agreed the requirement to demonstrate best execution can help define best practice for advisory processes within banks and that transparency can become a competitive differentiator. Even firms operating outside of MiFID jurisdiction are approaching the Directive as a commonsense framework with some roundtable participants claiming it has the potential to protect them from client lawsuits over poor performance of their assets.

Concerns were also expressed that different interpretations of MiFID are preventing some firms from being 100% compliant. While some banks are calling for benchmarking around best execution, others, like Morgan Stanley’s International Private Wealth Management division, see regulatory interpretation as a means of competitive differentiation.

When challenged as to whether they saw compliance as a business opportunity or constraint, roundtable participants maintained it is only beneficial if well applied and functional. However, the reality for many is that it is difficult to reach internal consensus on how to best implement compliance and those delays can make it appear to be more of a constraint.

All roundtable participants agreed that advisory services are a good revenue source for their firms and have plans to review their fee structures as their markets mature. Delegates were confident of healthy growth across the wealth management sector over the next three years, which almost half of the audience (43%) believe will be fuelled by the development of innovative investment advisory offerings. Interestingly, while 75% of respondents consider the development of an advisory business in their bank’s strategy as very important, only 21% said their advisory clients have signed an advisory mandate and pay a fee for this service.

Reasons for this discrepancy were mixed and largely attributed to fragmentation across the global wealth management market as well as product and client sophistication.

Didier Vankeerberghen, roundtable chair and director, Odyssey Financial Technologies explains: “The sophistication and interpretation of client advisory in wealth management differs according to geography and market maturity. Wealth management in Europe is more synonymous with traditional private banking so there is greater emphasis on advice and exclusivity. The US side follows more of a transaction-driven brokerage model with limited discretionary input, while Asia is more execution-based, providing no investment advice. Despite these differences, firms are reviewing how they connect with their customers, motivated not only by regulations like MiFID and Reg NMS, but also by how they can use these improved relationships to sustain their competitive edge.”