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When IBS last visited the subject of FATCA, we suggested that the name of the IRS be changed from 'Internal Revenue Service' to 'International Revenue Service'. FATCA has continued to tax the brightest minds in the compliance sector in the intervening period but what has become increasingly clear is that it is just one piece in a number of new regulations that will reshape the wealth management industry beyond recognition in the next few years.
Indeed, the very existence of offshore centres appeared to be threatened if the comments of Senator Sir Philip Bailhache of Jersey, made last year, were taken at face value. He suggested that...continues (login/subscribe).
Wealth managers and private banks must choose whether to invest whole-heartedly in compliance and new technologies or else contemplate exiting the industry.
The challenges facing wealth managers and private bankers today are manifold, and the number seems to be only increasing. And yet, the assets are increasing as well, which gives signs of optimism.
Speaking at a recent wealth management and private banking event organised by ERI and IBM, Steve Dyson, a specialist with years of experience at companies such as Schroders, State Street and BNY Mellon, expressed cautious optimism about the...continues (login/subscribe).
The wealth management industry is now at an inflection point, states Ian Woodhouse, consultant at PricewaterhouseCoopers (PwC). And it is up to the players to determine which way they go. Woodhouse shares his observations from PwC's recent '2013 Private Banking and Wealth Management Survey'.
Regulation is arguably the biggest contributor to the IT changes that the wealth management sector is undergoing at present, says Ian Woodhouse, consultant at PwC. Not only has it provoked an increased investment in technology, but it also has been changing the make-up of the markets, he adds. New rules in some highly regulated markets (such as Europe and the US), have led to downward pressure on returns through removing retrocessions from the equation, and this changes a company's business model, as it has a direct impact on the company's growth and profitability. So the issue a lot of small firms are struggling with is the prohibitively high costs of complying with the new regulations and the new business profit model. 'In this environment, it is very difficult to grow revenue,' he observes, so a lot of players are exiting the market or consolidating.
The new regulations are now focusing not only on the capital, but also on...continues (login/subscribe).
When Latvia-based private bank, Bank M2M Europe, spun off from Latvian Business Bank earlier this year, it inherited the Forpost core system from Lithuanian vendor, Forbis, which was mid-implementation. How has this project fared, and does the platform fit the bank's new life and strategy?
Bank M2M Europe in Latvia gained its banking licence on 21st May 2013 when its sole shareholder, Andrey Vdovin, a co-owner of the VMHY group (which includes Russian commercial banks, M2M Private Bank and ATB Bank, as well as Latvia-based M2M Asset Management), purchased 100 per cent of Latvian Business Bank (LBB). The bank continued to operate under the licence issued to LBB, whilst a fundamental rebranding and restructuring process occurred. The licence was subsequently re-registered after the rebrand, and as of 1st August this year, Bank M2M Europe had its own product line and a new strategic focus.
Bank M2M Europe now offers a wide range of services to high net-worth individuals in Russia, Latvia, the CIS and elsewhere in Europe. These include discretionary portfolio management services, term and subordinated deposits, current account and escrow account servicing, online banking, premium payments cards, fiduciary transactions, brokerage and custody services, as well as an open-ended investment fund. The principal goal of the purchase was to...continues (login/register).
When Van Lanschot Belgium needed to take action to keep up with its contemporaries, it had to decide whether to upgrade its legacy portfolio management solution or completely change it. The private bank tells IBS why it opted for the former.
Upgrading a portfolio management solution is an important process because software within the private banking industry needs to be equipped to be able to adapt to the ever-changing environment. Failure to keep a portfolio management solution up-to-date could lead to inefficient operations and reduced throughput. However, according to Peter Oosterlinck, ICT development director at Van Lanschot Belgium, 'simply upgrading a system can be as challenging as completely replacing it'. But, he says, as long as there is...continues (login/subscribe).
When Abu Dhabi-based First Gulf Bank launched its wealth management business in 2007, it had no automated investment accounting system to speak of, instead relying solely on manual processing. After a slow start, the growing volumes forced the bank into a significant cultural change, underpinned by Indian vendor Miles Software.
For First Gulf Bank (FGB) the need for a new wealth management system was simple, explains Navin Sharma, head, wealth management. The bank, which has grown from its inception in the late 1970s to one of the five largest banks in the UAE, launched its wealth management business in 2007, but had no automated accounting system to support it. Instead it relied on manual input and excel spreadsheets to process transactions. 'We realised we could not rely on manual processing anymore and we had to get a fully-fledged system to support our operational needs and risk management, as well as being able to offer much more to our clients,' he says. With the old set-up, FGB had to manually enter transactions and most of the automation was handled by...continues (login/subscribe).
Private banking software provider, Avaloq, has released its own version of a BPO offering based on its well-established core banking solution. How does this differ from existing outsource offerings on the market?
Avaloq is building a global network of BPO centres for banks in an ambitious programme dubbed Avaloq Banking Sky. The offered solution is based on Avaloq's own core banking platform. There is one instance of the platform across the locations and the same set-up, which ensures harmonisation across the network, states Martin Frick, general manager, BPO at Avaloq.
The roots of the project lie in the Swiss BPO operation of Avaloq, B-source, which is a joint venture with...continues (login/subscribe).
Having acquired front-to-back office solutions provider, Peterevans, last year, UK wealth sector outsource heavyweight, Equiniti, is bringing to market a broader offering. How and why did it seek to do so?
With the wealth management space facing unprecedented pressures on costs, tougher regulatory demands and the requirement for greater transparency, many FIs are having to change the ways in which they operate, not only to increase revenue, but to survive. UK-based Equiniti, a share registrar and financial services outsourcing specialist, sought to broaden its services to ease those industry burdens and respond to the market demand for a 'commoditised back office system which isn't prohibitively expensive', comments Mark Taylor, managing director. He says: 'The wealth and broking space is facing unexpected pressures which current back office solutions are simply not...continues (login/subscribe).
What goes up must stay up. At least that appears to be the case when surveying the volume of regulation targeted at private banks and wealth managers. FATCA is a prime example.
One piece of regulation which is exercising the minds of compliance departments in the wealth management industry and the wider financial industry is FATCA, the US's Foreign Account Tax Compliance Act. Once enacted, it will allow the US Internal Revenue Service to track and tax US entities' assets which are held abroad, by putting the onus on foreign banks to report the details. There are three parts to the Act: a customer due diligence and identification piece; a reporting piece; and a piece that deals with the withholding penalty. There are a number of hurdles for financial institutions to jump in the next few years, starting in July 2014 when new account due diligence begins. By the end of 2014 remediation on the first type of existing entities must be completed. The first kinds of reporting, such as tax return reporting, will be required in 2015, with this expanding the following year. Withholding also begins in 2014 and will be expanded in 2017, including for pass-through payments.
While plenty of time has to pass, the regulation has already had an impact on the industry as institutions anticipate...continues (login/subscribe).
Thurleigh Investment Managers has a settled relationship with Pulse Software, a UK-based supplier it contracted to replace Sungard's Ambit Private Banking System a couple of years ago. How is it getting on?
On reading this year's IBS wealth management supplement one could be forgiven for thinking that the age-old argument between in-house deployment and outsourced services has finally been settled, and in favour of the latter. The benefits of leaving your IT in the hands of a specialist which can dedicate itself to updates and share the costs across a pool of users are ever more appreciated in an environment where compliance and cost-cutting are at the top of the agenda of wealth managers and private bankers worldwide. And on the supplier side, the technology providers are finally catching up to the demand for all-encompassing outsource offerings, with the likes of Avaloq and Equiniti profiled in this supplement.
A useful counter-example to this comes from Thurleigh Investment Managers, a London-headquartered wealth management business which offers services to private clients and charities. Having weighed up the benefits of outsourcing its IT operations, it selected...continues (login/subscribe).
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Established in 1991, IBS Journal is the definitive independent source of news and analysis relating to financial technology. We talk to banking systems and financial technology users about their strategies and experiences; we drill down into the activities and plans of the suppliers; and we ensure that our readers are kept fully informed on all of the industry events and trends. Visit the IBS Journal section of our website