Multi-currency exposure risks driving European growth in client reporting tools

By:
Russell J. Dinnage
Published on:

Concerns about currency movements are set to drive the expansion of the multi-million-dollar European market for client reporting tools, according to a report by Oliver Wyman Group consultancy Celent.

Celent predicts wealth manager IT spending on the web-based products will increase by between 5% and 8% in 2013.

The forecast comes as European clients of wealth managers become more worried about their currency risk at a time of heightened volatility in financial markets.

These European clients are demanding that the firms overseeing their investments provide them with faster, streamlined access to their portfolios through a range of cross-platform client reporting tools, so they can react quickly to changes in the market.

Client reporting tools generally consist of computer software that generates detailed reports for clients on the performance of their investments.

The report cites a number of business and technology trends to watch next year in the European market for such tools. They include the trickling down of portfolio reporting tools used by institutional investors to the retail market of wealth manager clients.

And while Celent says overall IT-infrastructure spending in 2013 by European wealth managers will be tepid, client reporting tools remain a strong area of investment for the firms across the continent.

"Larger firms with a pan-European presence, particularly private banks, will increasingly look for [client reporting tool] providers with global support that can implement a reporting solution that will be delivered across several regions," the report says.

The paper adds that local European regulatory regimes designed to increase transparency around investment performance are combining with US regulations – such as the Fair and Accurate Credit Transactions Act, which requires European wealth managers to report offshore holdings to the IRS – to enhance the sophistication of European client reporting tool offerings.

In particular, constraints on the IT budgets of European portfolio managers in 2013 will force the firms to incentivize the software companies they work with to build the client reporting tools to create new products that offer customers consolidated ways to view their investments, the report says.

"As [European] wealth management firms continue to deal with new compliance requirements, new reporting demands from investors and more requests on front-office communication, many wealth managers looking to retain their client base have no choice but to seek client reporting tools," the report says.