The need for wealth-as-a-service

Recent times have witnessed the popularity of white-label banking, or as it is widely known – Banking-as-a-Service (BaaS).

BaaS allows banks to expand their reach by catering to wider and newer segments of customers – made possible by the integration of their APIs with non-bank services. Both incumbents and new-age banks are leveraging the BaaS model extensively, as is made apparent by the projected global market size of BaaS – on target to reach USD 74.55 billion by 2030.

Exploring the Potential of Wealth-as-a-Service (WaaS)

The banking business today expects agility with quick, tangible results. Banks have thus been increasingly reluctant to commit heavy IT spending to programs that are costly, complex, and come with a high risk of failure. In this climate, the BaaS model has proved to be an asset to the Financial Services (FS) industry by providing customers with the financial services they require, delivered at the time-of-need and through the appropriate means. Some in the FS industry are now wondering: could the same SaaS model be applied to wealth management? A Wealth-as-a-Service (WaaS) model could allow wealth managers to expand their reach to hitherto-inaccessible markets. For instance, by offering services modularly to clients, without spending a fortune and sacrificing valuable time building the capabilities in-house.

Traditional Challenges in Wealth Management

Apart from this, there are many traditional challenges that a WaaS offering could help tackle in the WM industry:​

Costly and inflexible servicing

Every evolution to a service or product requires a vast amount of energy across siloed applications. Moreover, IT relies on legacy platforms with a frontier between front office, middle office, back office and between data and production. This status-quo favors ballooning back-office compliance costs and risk costs.

Limited digital maturity

Traditional wealth solutions rely on ageing platforms and are complex to maintain and upgrade​. Even as banks embrace digitalization, their efforts are often either customer-centric or bank-centric, but rarely both. Also, information that could drive personalization in wealth offerings by building on commonalities in advisory and investment, is rarely used to its utmost benefit.

One product, one price

Pricing of WM products has historically been complex and tightly coupled to the product. Since the client base for wealth managers varies from Mass Affluent to Ultra High Net Worth Individuals (UHNWIs), the pricing of products should ideally be customized and variated across customer segments and profiles.

Scattered wealth players

The complexity of wealth investment requires expertise and technology from very different areas to be pooled together, with no common ground to play with. This further results in each player having its own tools, limiting their ability to interact without extreme (costly) customization.

Technological Enablers of Wealth Management as a Service

BaaS was made possible by technology. Today WealthTechs perform that role, providing services across the value chain of Wealth Management, and serving as a conducive ecosystem to implement the WaaS model. Firms such as Temenos and InvestCloud already offer platforms that can be modularly deployed across the entire WM value chain. These extended bank services foster the energies of institutions and third parties to better collaborate through a “Wealth Marketplace” that add value for end clients.

Key Features of an Ideal WaaS Offering

As with any other SaaS model, an ideal WaaS offering should leverage new technological paradigms to enable modularity and be adaptable to customer needs and ambitions. It should thus have the option to be offered either as a turnkey solution on a shared platform with low customization, or as a personalized platform that is custom-made for advanced client needs with extended bank capabilities. Offers could range from a full WaaS on a shared platform, a Hybrid WaaS that can be deployed modularly, to a private WaaS on a personalized platform. In any form, WaaS must have the necessary features to append to the capabilities of an FS provider:

• Open: It should allowomni-channels to be easily plugged to third-party APIs
• Modular: It should be built on new architectures that offer a modular approach – to deploy progressively, only the required components
• Multi-tenant: It should be able to serve multi-entities in a vast array of geographical, legal, and financial combinations
• Cloud-native: It should be designed to reside in the cloud, across any cloud service provider, and offering the benefits of microservices and auto scaling
• Pay-as-you-use model: Pricing models should be evolutive – usage based, packages, subscriptions – to be able to serve the needs of every client firm​
• Continuously enriching: To remain competitive, the WaaS ecosystem should be continuously enriching its service catalogue with best-of-breed solutions​

Market Trends and Early Adopters of Wealth-as-a-Service

As many providers of WaaS models emerge in the market, banks have already started to join the trend and grab the early mover’s advantage. With the Wealth Management industry ripe for harnessing the benefits of a WaaS model, the success of BaaS models has already paved the way for its adoption. With the technology and a marketplace already established, it will be interesting to witness the trend unfold.