Wealth Management Outsourcing: A Global Market Perspective

by Arin Ray,  Alexander Camargo, July 23, 2012
Global, Asia-Pacific, EMEA, North America


In the aftermath of the financial crisis, wealth management firms are facing a number of challenges, including having to lower costs, improve efficiency, reduce turnaround time, scale up or down operations, mitigate risk, and adhere to stringent regulations. All of these have brought technology centre stage in managing financial institutions. Firms are finding it difficult to manage complex and diversified technology needs entirely in-house; many of them are increasingly looking at outsourcing as a viable alternative.

In a new report, Wealth Management Outsourcing: A Global Market Perspective, Celent discusses the adoption of outsourcing in the wealth management industry. Outsourcing has been in use in the financial services industry for quite some time. However, the wealth management services industry has been a laggard. Because of the privacy and confidentiality issues involved in this business, wealth managers have been reluctant to engage with third party providers.

The global financial crisis has changed that perspective and contributed to a major paradigm shift. Many wealth management firms are realizing the potential benefits outsourcing can offer. Most of the tier I and some tier II retail banks and insurance companies in the US, including their wealth management divisions, are outsourcing parts of their technology and operations infrastructure. Similarly tier I brokerages have also been outsourcing their technology needs and are fairly advanced. Europe lags the US in terms of the maturity of outsourcing practices. Due to stringent privacy requirements, especially in Switzerland, European firms still cannot outsource all of the same functionalities as US firms. Outsourcing has also not been as popular yet in Asia.

“The further a wealth management function is from client interfacing, the more likely it is to be outsourced,” says Arin Ray, Analyst at Celent and coauthor of the report, “Outsourcing in the areas of global custody, securities lending, client servicing, accounting, and settlement of trades in complex financial instruments, are relatively widespread, with managers taking a more aggressive approach to mainstream outsourcing.”

“IT budgets are expected to remain flat or decline in most markets, which will restrict firms’ ability to spend on technology,” says Alexander Camargo, Analyst at Celent and coauthor of the report. “However, this also means firms will have to do more with less. Outsourcing provides an option for increasing efficiency without needing significant investments in infrastructure.”

This report examines the trends, drivers, and state of outsourcing in the industry as well as the available opportunities across various market segments.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
Tel: +1 212 345 1366

Europe (London)
Chris Williams
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary





Defining Outsourcing


Market Trends



Problems Plaguing Today’s Wealth Managers



Drivers of Outsourcing



Stage of Adoption



Spending for Wealth Management Outsourcing



Challenges in Outsourcing


Technology Strategy at Wealth Management Firms



Criteria for Choosing Outsourcing Vendors



Commonly Outsourced Functionalities


Vendor Overview




Leveraging Celent’s Expertise



Support for Financial Institutions



Support for Vendors


Related Celent Research


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