Current challenges About the global EY organization … | Current challenges and solutions in Wealth &Asset Management Current challenges and solutions in Wealth &Asset Management

Current challenges and solutions in Wealth & Asset Management

EY | Assurance | Tax | Transactions | Advisory

About the global EY organization

© 2015 | Ernst & Young Ltd | All Rights Reserved.

The global EY organization is a leader in

assurance, tax, transaction and advisory

services. We leverage our experience,

knowledge and services to help build trust

and confidence in the capital markets and in

economies all over the world. We are ideally

equipped for this task — with well trained

employees, strong teams, excellent services

and outstanding client relations. Our global

purpose is to drive progress and make a

difference by building a better working

world — for our people, for our clients and for

our communities.

The global EY organization refers to all

member firms of Ernst & Young Global

Limited (EYG). Each EYG member firm is a

separate legal entity and has no liability for

another such entity’s acts or omissions.

Ernst & Young Global Limited, a UK company

limited by guarantee, does not provide

services to clients. For more information,

please visit www.ey.com

EY’s organization is represented in Switzer

land by Ernst & Young Ltd, Basel, with

ten offices across Switzerland, and in

Liechtenstein by Ernst & Young AG, Vaduz.

In this publication, “EY” and “we” refer

to Ernst & Young Ltd, Basel, a member firm

of Ernst & Young Global Limited.

Contents

Introduction 4

New reality 6

Impact of VUCA on Wealth & Asset Management 10

1. Rethink the strategy 12

2. Transform business models 14

3. Integrate support functions 16

4. Adapt IT infrastructure and data management 20

5. Change the corporate culture 24

Implementing new regulatory requirements 26

Auditing in the new reality — assurance, prospects and added value 28

Your contacts 32

The financial services industry is in the midst of transformation toward a new reality.The whole picture must be understood, from every perspective. Those who do not adapt will be left behind.

4 | Current challenges and solutions in Wealth & Asset Management Current challenges and solutions in Wealth & Asset Management | 5

Switzerland is one of the market-leading

countries for global asset management.

However, the framework conditions have

changed.

Pressure on margins, changes in customer

behavior and stricter regulation are forcing

financial institutions to have a rethink.

Technology and digitization are also

accelerating change. And we are not talking

about gradual adjustments. Rather, the

sector is essentially facing a paradigm shift.

This is setting in motion a series of revolu-

tionary changes that impact financial

service providers from every angle. New

ideas and solutions are needed. And the fact

of the matter is: those who do not adapt

will be left behind.

In the following pages we take a closer

look at the increased expectations on

financial service providers. We hope you

enjoy reading this booklet and look forward

to discussing its contents with you.

Einleitung

Bruno Patusi

Partner

Head of Wealth & Asset Management

Switzerland


The financial industry is undergoing a funda-

mental transformation process toward a

new reality. In the past, it was heavily based

upon the dollar, mainly controlled by the

western world and had low levels of automa-

tion and technology in its business processes.

In the rapidly approaching new reality,

the financial industry will be based upon

multiple currencies, with a multipolar

orientation and business processes that are

highly automated and digitized.

The drivers behind the current transformation

process are the shift in the geopolitical

power structure, demographic change,

changes in customer behavior, changing

values in society, technological advances in

social media and data management as well

as a sharp increase in regulation following

the financial crisis.

The current change process is shaped by

four factors: volatility, uncertainty,

complexity and ambiguity (or VUCA for

short). These forces are impacting all

financial institutions.

Business fundamentals are changing and

value chains are undergoing restructuring.

This is not an orderly transition; on the

contrary, what we are seeing is a seismic

shift that is generating instability.

This phase has already started and is set to

continue over the next ten years.

New reality

Volatility Uncertainty Complexity AmbiguityThe next few years will be marked by erratic changes.

The speed and extent of the shifts are increasing and it is

not possible to predict a trend or recognize a recurring

pattern. Challenges now appear suddenly, without advance

warning, and demand an immediate response. This increased

volatility is apparent in the price trajectory of commodities

and securities and the erratic development of the global

economy.

Increased volatility leads to greater uncertainty. The future

can no longer be derived from the past. During this period

of transition, future challenges can no longer be clearly

defined. Companies must expect surprises. They have to learn

to act without any certainty about future developments.

Increased connectivity and economic globalization are two of

several factors fueling complexity in the alignment and

leadership of companies. The wave of consolidation that can

be expected within the financial industry and the resulting

larger organizational units will also add to the complexity.

These changes — increased volatility, uncertainty and

complexity — ultimately engender ambiguity. The new reality

allows many interpretations. The significance of individual

events is no longer clearly identifiable and it is becoming

increasingly difficult to distinguish between cause and effect.

These developments heighten the risk of erroneous conclusions

and misinterpretation.

Current challenges and solutions in Wealth & Asset Management | 98 | Current challenges and solutions in Wealth & Asset Management


Impact of VUCA on Wealth & Asset Management

To survive in the rapidly approaching

new reality, institutions have to take an

interdisciplinary approach.

New regulatory requirements must also be

implemented and audits must increasingly

provide foresighted assurance and

generate added value.

One thing is clear in the current environ

ment: those who do not adapt will be left

behind. Companies must take measures in

order to master their entry into the digital

world. The corporate strategy must be

reconsidered and the business model

optimized. Changes in customer behavior,

pressure on margins and stricter regu

lations are forcing banks to reorient their

value chains. Banks need new ideas

and concepts in the new reality. And we

are not talking about gradual adjustments.

Rather, the sector is essentially facing a

paradigm shift. IT is a key strategic

element as a means of guaranteeing an

organization’s growth, scalability and

efficiency in the context of VUCA.

Integrate support functions

Pictograms for Strategic Solutions

Customer Protection

Capital Markets Reform

Tax transparency

Prudential Basel III

Recovery & ResolutionPlanning

Culture change

Business Optimization

Technology Enabled Transformation

Customer Agenda, Digitalization & Revenue

Strategic Change

Tax transformation

Enterprise Intelligence & Data Management

Finance Change

Risk & Actuarial Transformation

TAX

TAX

Rethink the strategy

Transform business models


Customer Protection


Tax transparency



Culture change




Strategic Change

Tax transformation


Finance Change


TAX

TAX

Adapt IT infrastructure and data management


Customer Protection


Tax transparency



Culture change




Strategic Change

Tax transformation


Finance Change


TAX

TAX

Change the corporate culture


In past decades, corporate strategies

were based upon a fundamental under

standing of value creation, the validity of

which has eroded over time. Financial

institutions must rigorously adapt their

strategy to a new reality. However, many

aspects of the future playing field are

not yet foreseeable. And companies must

be agile enough to respond quicker.

Specific aspects of the strategy have to

be reviewed more than once a year. In

addition, companies have to cope with an

unprecedented array of parallel strategic

priorities: implications of regulatory

changes, sustainable enhancement of

efficiency, profitable earnings growth and

a reorientation of the business model

to a new reality.

These developments put a company’s

performance capability to the test.

A strategic interpretation is key to

converting risks into opportunities, driving

ahead market consolidation, transforming

business models and optimizing the

value chain. Restructuring operations

and acquisitions will be core elements

of many corporate strategies in the

coming years. In the new reality, the

message is clearer than ever before: Get big, get niche or get out.

An isolated perspective does not help

our customers achieve their objectives.

This is why our strategy advisors

are fully integrated members of a

team, contributing the expertise that

is critically important for you on

subjects ranging from regulatory

aspects or operations and IT to

finance, tax and legal.

We also stand out from our competi-

tors because of our pragmatic,

results-oriented approach, offering the

benefits of our technical advisory

expertise combined with transaction

support skills.

EY’s strategy team can work with

you to help you adapt successfully to

the new reality.

Olaf Toepfer

Partner

Philipp Arnet Partner

Peppi Schnieper

Executive Director


Customer Protection


Tax transparency



Culture change




Strategic Change

Tax transformation


Finance Change


TAX

TAX


“Strategy is defined by where to play and how to win” Olaf Toepfer, Partner



Achim Bauer

Partner

Bruno Patusi

Partner

Christian Soguel

Partner

Business models that proved successful

in the past may not necessarily work in the

new reality. One of the driving forces is

the conjuncture whereby profitable cross-

border business in its previous form has

fallen away. The dramatic changes in

the market environment and in customer

behavior go hand in hand with the

rapid development of new technologies.

Digitization is also an increasingly

important success factor in the asset

management business.

The extent to which financial institutions

are affected by these upheavals varies

and, consequently, the challenges they

face are just as varied. But they all have

one thing in common: financial institu-

tions must align their pricing and service

offerings more closely to the needs of

their customers and shift from a product-

centric to a customer-centric business

model. They must find ways of working

toward seemingly conflicting goals

in parallel. In effect, this means either

increasing efficiency while pursuing

growth or reducing costs while investing

in IT systems.

Reorientation in investment advisory

services One thing is clear in the current

environment: Financial institutions must

renew their value proposition to their

customers. This requires a review of the

key processes throughout the entire

value chain, from the time a customer

opens an account through to the invest

ment advice and investment process

and on to customer reporting. New

technologies and digitization play a key

role in this respect.

A new business model Pressure on

margins is growing. Financial institutions

have to operate more costeffectively and

efficiently in the new reality, as asset

management revenues increasingly come

under pressure. In the current environment,

key questions must be asked with regard

to the business model: At which locations

do institutions wish to have a presence?

Which booking centers are of relevance

to them? Where should they centralize

IT, operations and back office? Which

functions and services should they

deal with inhouse and which ones

should they outsource? The path to the

future is marked by more automation,

industrialization and standardization of

the core business.

Digitization as a key success factor

Digitization is not limited to online

banking and apps. Digitization refers to

the networked automation of standard

izable process steps while prioritizing the

planned data flow as a feature of the

architecture. Financial institutions must

radically rethink their processes “front to

back” and focus upon the value contribu

tion and differentiation characteristics

integral to every action throughout the

value chain.

A strategic (external and internal)

customeroriented digitization strategy

ultimately leads to an urgently needed

cost reduction. This will significantly

increase the sustainability of the

economic business model in the asset

management business.

The key prerequisites for future success

include a sharper customer focus,

the creation of new pricing and service

offerings and a review of the existing

portfolio as well as the simplification of

complex processes. The key to success

is to strike the best possible balance

between customers, costs and

digiti zation — with fewer, but better,

resources and processes.

EY’s knowledge of the entire peer group

and the benchmarks at all stages of

the value chain gives you a competitive

edge based on wide-ranging industry

models and backed by our many years of

experience.

Our integrated approach to business

optimization is based upon the underlying

factors of time, costs and quality within

your organization, with the aim of

identifying areas where sustainable optimi-

zation is possible. Put us to the test.

“The entire value chain needs to be adapted to

the new economic framework conditions” Achim Bauer, Partner


Marco Amato

Partner

Marc Ryser

Partner

Rolf Geier

Partner


The control functions finance, compliance

and risk management have already

seen dramatic changes in requirements

since the start of the financial and

economic crisis, coupled with increased

expectations regarding cost efficiency.

Now, the new reality calls for a strategic

realignment of both control and support

functions. On the one hand, this will entail

a sustainable improvement in efficiency by

industrializing administrative and

transaction-based workflows, based upon

an approach to standardization, automa-

tion and outsourcing. Even more impor-

tant, however, are the requirements for a

change in the contribution that these

functions make to value creation, and an

entirely new type of cooperation between

the functions. In the new reality, strategic

planning, financial planning, capital

allocation, compliance, risk and liquidity

management must all be closely coordi-

nated with respect to critical aspects.

The new environment also requires

companies to make significant adjustments

to central support functions, especially

in the management of finance, risk and tax.

These three areas should not be consid

ered in isolation. Rather, they need to be

integrated into a consistent system,

enabling the functions to provide organi

zations with relevant information during

this period of uncertainty.

Finance Today’s advanced technologies

enable integrated and timely financial

reporting. As evidenced by the volatility

of markets, there are no safe havens left

today, be it in currencies, commodities or

elsewhere. Financial institutions must

understand these influences and factor

in their consequences in order to keep

pace with a rapidly changing market and

anticipate the corres pon ding ramifica

tions. Transparency of current indicators

is merely a starting point — leading players

are already able to forecast and plan in

real time using integrated programs. The

new paradigm in financial control is a “no

surprises” culture.

Risk transformation Today’s unprece

dented pressure from regulators (including

the delimitation of capital, liquidity and

management responsibility) is colliding

with eroding margins, efforts to improve

performance and cost cutting in the core

and noncore businesses. This is forcing

financial service providers to redesign

their risk functions (mandate, organiza

tion, guidelines, methodology, process and

control functions, data and culture)

in order to fulfil the requirements in this

rapidly changing environment.

Tax Demands on tax functions have

increased tremendously over recent years.

Globalization, rapid and widereaching

changes in the legal framework conditions,

greater transparency and shorter financial

close cycles are just some of the

challenges that tax managers face. The

financial and reputation risks are

increasing accordingly. In order to survive

this situation with scarce resources,

efficient and stable processes are required

along with taxspecific applications.

These applications relieve tax managers

from routine tasks and enable them

to concentrate on valueadding activities.

With our comprehensive approach,

we can support your transformation

program — from the business case through

to implementation.

Whether you are launching a reorientation

or harmonizing your various support

functions, EY is your partner of choice.

As one of your key strategic partners,

we ensure that you benefit from the “no

surprises” approach.


“Requirements for control and support functions will change fundamentally in the new reality.” Marco Amato, Partner



Andreas Toggwyler

Partner

Davide Gobbo

Executive Director

Robert Rümmler

Senior Manager

The strategic importance of IT must

be recognized as a key production

factor. There must be a clearly defined

technology strategy at the heart

of every financial services company.

IT systems and harmonized data

management make it possible to

implement the necessary changes to

business models and processes with

agility and cost efficiency.

By integrating IT architecture and

implementing efficient data manage-

ment, financial service providers can

improve their agility and equip them-

selves to react to changes more quickly

and adequately. The integration of data

and application architectures remedies

some of the legacy complexity that has

developed over time. This approach will

simultaneously unlock opportunities to

tap into new business areas and improve

risk mitigation with the help of data and

intelligent analyses. Dynamic data that

can be collected and evaluated over

time is gradually becoming more

important than static data. Dynamic

data makes it possible to measure

customer behavior and to implement

new types of segmentation — offering

significant advantages for marketing,

sales and especially digitization.

Methods of this sort have already

become established in retail banking and

they are also emerging as a critical

success factor in the asset management

business. These new approaches

also open up the way to efficiently

supplying management and supervisory

authorities with the information they

require.

IT systems Current IT systems, often

legacy systems that have developed over

time, are in need of a thorough overhaul.

The growing mass of information and the

constant increase in cost pressure are

forcing institutions to examine possibili

ties for stepping up the joint use of key

resources. This calls for IT architecture

that allows standardization and industri

alization of business processes. Endto

end integration at application level is the

basis for a faster and more efficient

response to regulatory requirements.

Data management Data has a parti c

ularly significant role in the new

reality. The prerequisite for functional

data management is an integrated data

architecture that enables efficient

businesswide generation of standardized

analyses and reports from a variety of

perspectives. A comprehensive data

management concept is essential in order

to respond efficiently to regulators‘

increased requirements. This is why the

growing complexity of data management

calls for an expansion of data governance,

in order to ensure the integrity and

quality of data throughout the enterprise.

Analytical capabilities Changes in

customer behavior in a changing market —

due to digitization in particular — are

significantly increasing demands on com

panies‘ analytical capabilities. Processes

and technologies are needed that enable

forecasting of likely customer behavior

and the development of a customized

offering. The most common applications

include client segmentation, strengthening

customer loyalty, increasing turnover

and profitability, and credit scoring.

EY offers you a wide range of cross-

functional advisory services in the field

of digitization — from strategy to

implementation.

With our comprehensive approach, we

support financial institutions with the

transformation of their IT infrastructure

and with customer-centric data manage-

ment.

Whether you are launching a reorien-

tation or harmonizing your existing

solutions, EY is your partner of choice.


Customer Protection


Tax transparency



Culture change




Strategic Change

Tax transformation


Finance Change


TAX

TAX


“Data and analytics play a decisive part in coping with the implications of VUCA.”Davide Gobbo, Executive Director


“A performanceoriented culture is not the result of corporate success — it is the decisive factor in that success” Jörg Thews, Partner

Changing the corporate culture

Corporate culture must be developed

and influenced over the long term in

order to attain effective implementation

of organizational objectives and to make

businesses more dynamic and adaptable.

In this sense, culture is even more

important than structure as a competitive

factor.

To achieve this, corporate goals, values

and desired behavior patterns must

be reviewed and transformed into actual

work practices and decision-making

principles in day-to-day working life.

A corporate culture that is successfully

geared to the goals calls for effective

and efficient implementation of the

strategy and organizational require-

ments as the outcome of the activities

and decisions of all employees.

At the end of the day, the necessary,

desired culture is not recorded on

paper — it is evident in everyday working

life and in daytoday dealings with

clients. Any deviations must be specifically

addressed and corrected using the

various mechanisms that are available.

This creates trust, which is of paramount

importance in the wealth and asset

management business. The conduct of

client advisors, for example, in their

regular interaction with customers is a

particularly critical factor here. The

desired behavior should not be controlled

primarily by checks and the threat of

sanctions, but by an understanding of

objectives and values, and by gearing all

the elements of the organization toward

supporting the implementation of that

behavior. To ensure a lasting transfor

mation, operational change must go hand

in hand with cultural change. Key target

groups must be defined for an adaptation

of the culture, and they must be involved

in determining the vision, the objectives

and the behavior patterns. If all the

main players and decision makers are

involved in initiatives to deal with specific

issues, cultural change will come about

spontaneously. A performanceoriented

culture is not the result of corporate

success — it is the decisive factor in that

success.

Let’s join forces to transform your

corporate culture into a competitive

advantage. Benefit from EY’s interna-

tional competence centers in Switzerland

and our wide-reaching experience with

peer group companies.

Our approach is designed to deliver

changes in corporate culture with direct,

measurable and lasting impact.


Customer Protection


Tax transparency



Culture change




Strategic Change

Tax transformation


Finance Change


TAX

TAX

Jörg Thews

Partner

Eric Lefebvre

Executive Director


Implementing new regulatory requirements

Christian Röthlin

Partner

Philippe Zimmermann

Partner

IMD II, MiFID II, MiFIR, FIDLEG, EMIR,

PRIIPs, CRD IV, CRR, AIFMD, UCITS V +

VI, ELTIF, EuVECA, MAD II, RDR, FATCA

and Dodd-Frank Act — these are just a

few examples of the masses of abbrevia-

tions and acronyms that financial

institutes around the world have to

grapple with. Regardless of their size

and diversification, all businesses have

to negotiate their way through this

labyrinth of regulatory changes. Failure

to comply means risking sanctions

and fines.

Customer protection Financial service

providers must adapt to the new reality.

This also includes complying with the

tighter customer protection regulations

(e.g. FIDLEG, FINIG and FinfraG). In the

asset management business, the focus is

on the appropriateness and suitability

test. Regulatory reforms in the area

of inducements and retrocessions also

require a fundamental review of the

entire value chain from the perspective

of product development and sales.

Tax transparency Financial institutions

have recognized and accepted that there

is no way to bypass total tax transparen

cy. The implementation of different

initiatives to improve tax transparency

is, however, complex, not to mention

time and costintensive: taxable funds

are mobile and honest tax payers make

for more demanding customers. In

the future, banks in the offshore

business will be in direct competition

with other banks in the customer’s home

country.

Financial institutions must proactively

tackle the issue of tax transparency. The

key factors at customer level are FATCA

(the Foreign Account Tax Compliance

Act) on the one hand, and AEI (the

automatic exchange of information) on

the other hand. At company level, the

OECD has initiated BEPS (Base Erosion

and Profit Shifting); thus the trend

toward total tax transparency does not

stop at companies.

Regardless of whether national or

international regulations are involved,

we believe that an integrated approach

to present and future regulatory

changes will prove beneficial in the

long term.

Thanks to its globally networked

teams with their local roots, EY

maintains continuous dialog with

national and international authorities

and regulators.

We can deploy our wealth of experi-

ence to help you exploit synergies.

That is what makes us a strategically

important partner in preparing and

implementing these regulatory

regimes. Interdisciplinary teams with

extensive experience in the asset

management business are on hand to

offer you support.

“In the tax world, FATCA is no doubt the catalyst for

a massive increase in transparency — but it is

one tile in the overall mosaic. It is increasingly evident

that we are going to see a rising tide of regulatory

and tax initiatives in the coming years.” Marco Amato, Partner


Auditing in the new reality — assurance, prospects and added value

Patrick Schwaller

Partner

Stéphane Muller

Partner

Clarity, simplicity and certainty have

enormous value in the new reality of

increasing volatility, uncertainty,

complexity and ambiguity. These are the

very factors that make assurance and

trust possible. Ultimately, they are

the essential prerequisites for soundly

based analyses and sustainable

decisions.

A comprehensive audit offers far more

than a mere confirmation of compliance

with legislation, regulations or relevant

standards. It helps understand the

various financial reporting documents

such as financial statements, risk and

controlling reports or performance

reports, and to set them in the relevant

context. It provides transparency and

clarity with regard to the essential

business processes and the quality of the

control functions.

A comprehensive audit is futureoriented;

it provides impetus and benchmark

comparisons, and singles out relevant

opportunities and risks. In these ways, we

create added value for all the company’s

stakeholders and investors.

We focus our organization consistently

on the financial industry and we occupy a

leading position in the audit sector.

Our approach makes us a reliable and

trustworthy partner as we tackle the

challenges and future opportunities for

banks, insurers and fund companies,

day after day.

The EY service spectrum essentially

spans:

— Financial Audit

— Regulatory Audit

— Compliance Audit

— IT Security Audit

— Sustainability Audit

— Risk Assurance Services

— Investment Performance Services

— Financial Accounting Advisory Services

— Internal Audit

We are here to help you. Talk with us.

“Comprehensive audits reduce uncertainties and increase confidence — key requirements for good decisions.”Patrick Schwaller, Partner

30 | Current challenges and solutions in Wealth & Asset Management

“Change = opportunities. For you. For us.”Bruno Patusi, Partner


Marcel Stalder

Partner

Leader Financial Services

Switzerland

+41 58 286 31 11

[email protected]

Bruno Patusi

Partner

Leader Wealth & Asset

Management Switzerland

+41 58 286 46 90

[email protected]


Olaf Toepfer

Partner

+41 58 286 44 71

[email protected]

Philipp Arnet

Partner

+41 58 286 38 40

[email protected]

Peppi Schnieper

Executive Director

+41 58 286 37 03

[email protected]


Achim Bauer

Partner

+41 58 286 35 53

[email protected]

Bruno Patusi

Partner

+41 58 286 46 90

[email protected]

Christian Soguel

Partner

+41 58 286 41 04

[email protected]


Marco Amato

Partner

+41 58 286 83 80

[email protected]

Marc Ryser

Partner

+41 58 286 49 03

[email protected]

Rolf Geier

Partner

+41 58 286 44 94

[email protected]


Andreas Toggwyler

Partner

+41 58 286 59 62

[email protected]

Davide Gobbo

Executive Director

+41 58 286 3503

[email protected]

Robert Rümmler

Senior Manager

+41 58 286 42 67

[email protected]

Changing the c orporate culture

Jörg Thews

Partner

+41 58 286 35 67

[email protected]

Eric Lefebvre

Executive Director

+41 58 286 46 76

[email protected]

Implementing new regulatory requirements

Christian Röthlin

Partner

+41 58 286 35 38

[email protected]

Philippe Zimmermann

Partner

+41 58 286 32 19

[email protected]

Auditing in the new reality — assurance,

prospects and added value

Patrick Schwaller

Partner

+41 58 286 69 30

[email protected]

Stéphane Muller

Partner

+41 58 286 55 95

[email protected]

Your contacts

Current challenges and solutions in Wealth & Asset Management | 3534 Insurance Trends in the Market | Thema der Seite EY 2014 – All Rights Reserved

From all perspectives — understand the whole picture

www.ey.com/ch/perspectives

Documents

Current challenges About the global EY organization … | Current challenges and solutions in Wealth &Asset Management Current challenges and solutions in Wealth &Asset Management