• New joint report from Deloitte Luxembourg and FNZ explores how end-to-end platforms provide a strong option for private banks wanting to execute on transformational digital and AI strategies, gain agility, and benefit from more efficient operating models.

  • The global report highlights the challenge private banks have in meeting the expectations of high-net-worth (HNW) investors for a sophisticated digital experience due to legacy technology and infrastructure.

  • The report also questions the resilience of private bank operating models to swings in client asset flows and valuations which can have a significant impact on revenue and margins.

  • End-to-end wealth management platforms provide a strong way forward by combining technology, infrastructure, and business process outsourcing, all within a regulated institution

14 December 2023: In a world where private banks, family offices and wealth management firms are dealing with highly complex investment processes, HNW investors are often left underserved by legacy systems that do not deliver the digital experience many have come to expect from retail peers and AI-driven technology. Firms are looking for ways to accelerate their digital transformations, improve the productivity of their relationship managers and advisers, and provide more business agility - all in the most cost-efficient way.

According to a new report by Deloitte Luxembourg and FNZ, the global end-to-end wealth management platform provider, a new approach to outsourcing for private banks could deliver on innovation and agility, provide a better experience for investors and private banking staff, and enable them the flexibility to generate new revenue streams.

The new report, titled “Achieving tech leadership in private banking”, is based on unique insights derived from illustrative case data and an analysis of public financial data from 30 global private banks, represents over $5tn in client assets.

According to the report, private banks are faced with inevitable operational changes. New technological advancements and related changes in client expectations are forcing private banks to adapt their operational models. A notable challenge in this adaptation stems from the rigidity of their operational cost structure. Up to 70-75% of these costs are fixed, indicating a pressing need to introduce more adaptability into their frameworks.

This inflexibility, combined with significantly higher cost-income ratios, typically above 75%, underscores the importance of reducing costs and boosting efficiency. These persistent challenges have led to a growing demand for outsourcing strategies. Numerous institutions are now implementing outsourcing into their value chain to effectively address these issues.

Patrick Laurent, Partner and Innovation Leader, and Pascal Martino, Partner and Banking and Human Capital Leader at Deloitte Luxembourg, said: “Outsourcing is becoming increasingly popular among private banks. By transitioning from high fixed-cost model to a more dynamic operational base, it is possible to boost agility and at the same time access up-to-date expertise, technology, and resources."

Pascal Martino, Partner and Banking and Human Capital Leader at Deloitte Luxembourg, remarked: “Adopting a new end-to-end wealth platform, as described in our joint report, is a transformative approach that integrates technology and operations, including advanced APIs, data analytics, core banking, and digital solutions into one, all within a regulated financial institution. Banks are advised to consider such platforms as strategic partners for their future transformation.”

The new forms of end-to-end outsourcing not only tackle costs but act as a catalyst to drive greater agility, security, and innovation in banks. Modern approaches align technology, operational processes, and talent together, allowing banks to focus more attention on deepening client relationships and revenue-generating activities. They also accelerate time-to-market of new products and services, ensuring stronger regulatory compliance and strategic flexibility.

Further, the report concludes that as the tech transformation in the private banking industry proceeds, institutions need to adapt quickly. Implementing end-to-end platforms into their value chain, banks can then leverage new technologies such as AI, cloud computing, advanced data analytics and open data APIs for their advantage.

To meet clients’ changing expectations private banks are advised to consider such platforms as strategic partners for their future transformation.

Philippe Bongrand, FNZ Managing Director Private Banking, said:

While opportunities exist, especially with AI, banks are suffering from too many complexities. What our wealth platform brings today is not only modern technology but also improving and de-risking the economic model. What we show with this report is that piecemeal outsourcing isn’t very effective, but full end-to-end platforms make sense for private banks who want to combine scale and agility in a much more resilient and regulated way.

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