What are the Differences in IT Requirements Between Wealth and Asset Management?

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By Roger Woolman Investor Services Industry Expert
May 8th 2023 | 4 minute read

Amid the ongoing hybridisation taking place across the investment management space, we’re seeing a growing crossover between asset and wealth managers, as each assesses the opportunities that expanding into the other’s business area offers. The revenue and operating synergies may be attractive. But do firms have the requisite IT system capabilities to cope?

It’s a conversation increasingly cropping up with the institutions we support. Firms in some cases already have a degree of client overlap, where they provide in-house funds and wealth management services to the same individuals. Being able to handle both business lines with a single operations team and technology infrastructure offers appealing cost efficiency potential, as well as providing investors with a uniform service experience and consistent, consolidated view of their investments.

Asset and wealth management brings some particular IT demands that firms will need to address if they are to cross over successfully.

Portfolio management, investor servicing and accounting

In wealth management, the client is the portfolio essentially. There is no separation between the asset position-keeping, portfolio management and investor.

In the collective investment asset management world by contrast, the portfolio management and investor servicing functions are distinct. Depending on the type of fund, an asset manager may not even be involved with the investors at all – their role purely to manage a portfolio of assets and deliver the values to another entity. The portfolio management system therefore is typically separate to the investor servicing solution, which maintains the share register and supports the co-mingling of different types of investors.

The funds world has a fund accounting component to accommodate as well. Fund accounting, with its concept of net asset value (NAV) and NAV per share, brings its own set of nuances that call for specific technology capabilities.

Along with the NAV layer, partnership-based accounting, private equity, unitised funds and so on require a general ledger, something not needed in the wealth space. In wealth, the individual’s portfolio is their balance sheet. You have the assets, and there may be some deduction of expenses within that portfolio, but it doesn’t require a double-entry bookkeeping system to create the trial balance, profit & loss and balance sheet.

Look-through data

Reporting in the wealth and asset management industries places different demands on how data is collected and delivered. One is portfolio-based. The other requires capital statement-type reporting on investments into the funds.

Look-through capabilities are critical in asset management, to provide transparency into the underlying holdings in the fund vehicles so the portfolio constituents can be reported accurately to each investor. That look-through entails different sets of data and connectivity across the systems. Reporting in the wealth space is much simpler in that the investments are held directly in the client’s portfolio.

Client reporting

Asset managers’ technology stacks may be able to accommodate most of the nuts and bolts of wealth management in terms of record keeping, whereas a wealth manager diversifying into fund management may find its systems cannot handle the entity structures and those NAV and general ledger components. Where an asset manager’s systems will likely come up short is in client reporting.

Wealth management reporting systems have evolved to be more investor-friendly, to meet the level of detail, customisation and presentation quality wealth clients expect to see. Asset management systems have tended to focus on generating reports for other systems and to support operations functions such as reconciliations. Whatever information is reported to investors will often be relatively high level and generic.

Digital lifecycle support

Digital portals in the asset management world are often inferior to offerings in the wealth space as well. Wealth management calls for extensive levels of client engagement and communication, with capabilities such as real-time information on daily activity, positions and valuations, online access to relevant documents and secure communication channels becoming must-haves.

The digital demands of both business lines nevertheless do have significant overlap. In the front end, similar capabilities are required around the onboarding of new wealth clients and asset management investors to make processes as self-serviced as possible. Anti-money laundering (AML) and know your customer (KYC) regulatory compliance obligations are similar too. Demand for digitalised information delivery as part of ongoing client servicing is another common feature.

One portal with the right functionality could therefore be used across both business lines.

Finding such areas of cross-business application will determine to what extent firms can, in practice, streamline their technology stacks. Much then will depend on how flexible a firm’s solutions are and their ability to integrate and consume data.

Deep Pool is the #1 investor servicing and compliance solutions supplier, providing cutting-edge software and consulting services to the world’s leading fund administrators and asset managers. Our flexible solution suite, developed by an experienced team of accountants, business analysts and software engineers, supports offshore and onshore hedge funds, partnerships, private equity vehicles, retail funds and regulated financial firms. Deep Pool is a global organisation with offices in Dublin, Ireland, the United States, the Cayman Islands and Slovakia. For more information, visit: www.deep-pool.com.



Roger Woolman
Roger has over 25 years of experience as a finance & technology exec. He co-founded Deep Pool/HWM Group in 2006 & rejoined in 2021 following his role as Director of Funds & Alternatives at SS&C Advent where he oversaw business development activities for their international fund management business.