Banks Race Toward Technology Solutions to Path Future Growth

October 28, 2021 — Boston

As private bank and trust executives strive to retain advisors (61%), improve client experiences (52%), and mitigate reputational risk (48%), investing in technology has increased

As advisor movement and competition in wealth management and banking intensifies, bank executives are increasingly turning to technology to stave off threats and embrace new opportunities for growth. Through both proprietary developments as well as third-party software adoption, executives are committing substantial resources to technology initiatives, according to Cerulli’s latest report, U.S. Private Banks & Trust Companies 2021: Competing with Technology.

Supporting advisors and increasing productivity through technology has been a consistent theme for private banks for the past few years. However, in 2021, the initiative has gained increased momentum, with nearly two-thirds of private bank and trust executives (61%) stating that better supporting advisors with technology is a very important strategic priority. “Banks are trying to defend against advisor movement. With advisor attrition becoming a considerable threat in the private bank and bank trust space, firms are investing billions of dollars annually to add technologies that can significantly ease unnecessary burdens for advisors,” according to Chayce Horton, senior analyst.

Additionally, investing in digital capabilities to improve the client experience is a leading priority for 90% of bank executives. Client-facing technology implementation overtook managing compliance and regulatory concerns in 2021 to become the second-most important strategic initiative among executives at private banks and trust firms. “Banks recognize that digital experience can make or break a client relationship. Digital enablement has become integral to maintaining a competitive client journey. Banks that lack adequate client-facing digital functionality run the risk of jeopardizing current and next-gen clients.” remarks Horton.

Beyond improving the advisor and client experience, nearly half (48%) of bank executives are evaluating ways to manage reputation and cultural risk. With numerous scandals in the industry and the resulting scrutiny from regulators and clients alike, managing reputation is critical. At the same time, firms are also growing more concerned with internal culture, business practices, and regulatory requirements. “The shift to AUM-based fees, reduced revenue sharing, and more centralized due diligence functions, largely influenced by Reg BI, has been impactful for all wealth managers. This has caused many firms to seek differentiation through value-added services best served by technology, such as tax management or customized investing often delivered through direct indexing solutions.”

Implementing these strategic objectives will require banks to prioritize investing in technology, and most leaders understand the importance of allocating resources toward these objectives. Looking forward, 65% of bank executives expect their firm to increase its technology budget over the next three years, while only 6% expect a decline. “Though firms may be willing to pile in the dollars, careful planning must be done to make sure the entire operational and client experience stack fits together smoothly,” remarks Horton. “The business must be aligned around a sound strategy and formulated goals to ensure large investments make the most impact,” he concludes.

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