Despite the eurozone crisis and slowing economic activity the analysts at Ovum are predicting that IT spending by the global wealth management industry will reach almost $35bn by 2016, powered by heavy investment in digital channels.
The Ovum report entitled ‘Wealth Management Technology Spending Through 2016’ says that the economy is recovering, and at least in comparison to the low of the 2008 banking crisis this is certainly true. The analysts predict that long delayed investment will be released in the wealth management sector, as elsewhere, and the rise of the digital online and mobile channels to market in the sector will also be key investment drivers.
Between 2011 and 2016 spending in the UK and Ireland in the wealth management sector will grow at a compound annual growth rate (CAGR) of 7.3 per cent, while Eastern Europe will see the strongest rise of 17.7 per cent (CAGR).
“Increasing profitability is a priority for all financial institutions,” says Jaroslaw Knapik, a senior financial services technology analyst at Ovum. “As the use of digital channels increases, banks will strengthen their focus on mobile channels and self-service functionality in an effort to connect and empower their customers.”
In other words, Ovum believes the growth in IT spending by wealth management institutions will give rise to more personal financial management tools and real-time data tools for customers. Increased support for smartphones and tablets will be driven largely by investment from non-financial institutions, as well as the recent advances made in mobile finance platform technology. Wealth managers can easily use these devices, however, to advance their own service with simple apps. Ovum forecasts that investment in internet and presence technologies by UK and Ireland’s high net worth banking and financial planning businesses will reach $80.1m, while retail brokerage and retail asset management organisations will increase their investment to $63.8m and $42.8m, respectively.
“Customer attitudes to banks have changed greatly as a result of the financial crisis,” added Knapik. “Increasingly, digital channels are being developed to improve customer loyalty and cross-selling opportunities, but also to lower servicing costs. While the economy is recovering, organisations should be focusing on the opportunity to increase revenue and improve trust among customers. This, coupled with the increased investment in personal finance management tools, will enable more self-management and closer monitoring of financial assets, helping to increase overall knowledge of finance management.”