Global wealth management technology spending by banks, brokerages and insurance companies is set to reach $3.7 billion by the end of 2010, up 5% from 2009, according to a report released January 7 by Boston-based research firm
The report, “Wealth Management Business and IT Priorities for 2010: A Global Perspective,” is based on interviews with 46 financial institutions and 30 technology vendors in major markets worldwide. It found that financial services firms will continue to focus on the high net worth market, but are looking to reach out to lower net worth clients via self-service models.
The bulk of technology spending will be in advisor platforms, compliance, reporting, self-service and integration, Celent said.
“Although wealth management projects are at different stages globally, firms of all sizes are re-evaluating their wealth management structure to fix their immediate needs,” said Isabella Fonseca, senior analyst at Celent and co-author of the report. “We expect the majority of technology spending to be allocated at the front office, followed by the back office.”
Firms will focus on reducing costs and augmenting advisor productivity through the use of technology, added Arin Ray, Celent analyst and co-author of the report. They are likely to carefully evaluate the return on investment before making any investment, she added.
Europe is the largest market for wealth management IT spending, Celent said, with total 2009 spending at $1.6 billion, a 7% decline compared with 2008.
Barring any unexpected economic events, Celent expects a 5% increase in European IT spending this year.
In North America, IT spending related to wealth management totaled $1.5 billion last year, Celent said, a decrease of 8% from a year earlier. Celent believes that IT spending in North America will recover slowly, with a growth rate of 4% this year.
The wealth market in North America suffered disproportionately from the global economic downturn, Celent found, as the high net worth population dropped by as much as 20% in 2007 and 2008. The market recovered somewhat last year, and is expected to grow at a rate of 2.6% over the next three year period, Celent found.
Even though Asia accounts for only about 15% of the total high net worth population, it presents the biggest opportunity for wealth managers, Celent said, with a high net worth population growing at an annual rate of 12% to 15% from 2005 to 2007. This robust growth likely to continue, the report said, with the result that “Asia, backed by China and India, is likely to play a leading role in the recovery process.”
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