Everyone in wealth management thinks they’re very special. We’ve witnessed this through years of working with superannuation funds, insurers, financial advisers, and investment managers on what they need data and technology to do for them. Perhaps their parents all told them they were special slightly too often. But they may just have a point. The wealth management industry is highly regulated, and the need to demonstrate compliance with regulation does lead to some special requirements for data and technology. At a recent series of lunches held by the Fund Executives Association Ltd (FEAL), we extolled the virtues of specialist technology providers. But just how special do these technology providers need to be?
We explore two qualities that wealth management organisations should expect from their managed service providers (MSPs): baked-in compliance and operational excellence.
Baked-in compliance
The wealth management sector is tightly regulated, so an MSP that can help meet compliance requirements can substantially reduce the burden on operational staff. Two key APRA regulations that superannuation and wealth management firms need to be aware of are:
- CPS 230 (Operational Risk Management)
Focuses on how financial institutions manage operational risks, especially those arising from outsourcing and third-party relationships. - CPS 234 (Information Security Management)
Focuses on the security of information assets, requiring financial institutions to implement robust cybersecurity practices.
Wealth management organisations should look for MSPs that “bake in” compliance — and demonstration of compliance — with these and other relevant regulations into their service offerings. This includes:
Real-time reporting
MSPs should provide automated compliance reporting that aligns with CPS 230 and CPS 234 requirements, making it easier for wealth management firms to demonstrate compliance to regulators like APRA. Regular audits, incident response plans, and compliance tracking should be seamlessly integrated into the
MSP’s operational processes.- Security and risk management
MSPs must have comprehensive frameworks to ensure risk is managed according to CPS 230 guidelines and that information security protocols meet CPS 234 standards. This includes data encryption, secure backups, disaster recovery plans, and regular cybersecurity risk assessments.
By partnering with MSPs that take these regulatory requirements seriously, wealth management firms can mitigate the risk of non-compliance and protect themselves from potential fines, breaches and reputational damage.
Operational excellence: doing more with less
Driven in large part by regulation, many parts of the wealth management ecosystem are under pressure to provide better products and services, while keeping costs low. Having an MSP that is committed to operational excellence supports this. Ideally, the MSP should be motivated — both contractually and philosophically — to provide an increasingly high-quality service at a low, and even decreasing cost. To do this, an MSP must have the right tech stack in place. While the specific components and architecture vary, the MSP and its client should strive for a tech stack with the following characteristics:
- Automation
Keeping costs down while increasing service quality necessitates automation. It improves response times, reduces human errors, and enhances compliance through automated reporting and workflows. This efficiency enables MSPs to focus resources on more strategic initiatives — like overall platform improvements. - Legacy coupled with modern best practice
Many wealth management firms rely on legacy systems that are essential but often missing capability that more modern systems include. MSPs should integrate these with modern solutions, ensuring continuity without disrupting operations. Hybrid architectures bridge the gap between the old and the new, creating cohesive workflows. - Openness and interoperability
An interoperable tech stack allows multiple systems to work together, reducing inefficiencies. MSPs should prioritise openness through APIs and microservices, enabling data sharing across platforms, improving service delivery, and eliminating silos in wealth management ecosystems. - Data driven operating models
MSPs should leverage data to optimise operations, providing real-time insights into performance and compliance. Data driven models enhance decision-making, allowing wealth management firms to identify inefficiencies and improve outcomes based on actionable data. - AI
AI should ultimately enable predictive maintenance and automation of complex tasks like fraud detection and compliance monitoring. By using AI, MSPs improve operational efficiency, delivering faster and smarter services while reducing costs for wealth management firms.
Wealth management organisations need MSPs that go beyond providing standard IT services—they must demonstrate expertise in compliance and operational excellence. Baked-in compliance ensures alignment with key regulations like CPS 230 and CPS 234, reducing operational burdens and mitigating risk. Operational excellence, driven by automation, interoperability and AI, allows MSPs to deliver higher quality services at lower costs. By choosing MSPs with these strengths, wealth management firms can remain compliant and competitive in an increasingly regulated and technology dependent environment.
This article was produced as part of The Quarterly – Q1 FY25
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Key Contributors:
Kevin Fernandez is General Manager, Market Strategy and Propositions at Novigi, and is based in the Melbourne office.
Sophie Bowen-James is an analyst in the Market Strategy and Propositions team at Novigi, and is based in the Sydney office.