The knock-on costs of systems investment

There is no doubt that in an industry-wide initiative like MiFID, there is a sort of cost pass-back. “The client at the end of the chain pays for cost, either through increased commissions, fees or charges,” says Mr Wright, although these costs might be bundled up and not visible to the clients. He estimates, however, that some of the costs in which the wealth management community will incur to upgrade their systems will be passed on to the sale side. “Some of the investment banks are expected to become systematic internalisers (SI) and they will need liquidity and order flow to make their SI status worthwhile. It may well be that they would give better prices or incentives to fund and wealth managers to pass their orders to them.” This will put SI and stock exchanges in direct competition. But how much would cost a wealth management firm one of these integrated solutions? Generally there is reluctance among vendors to produce figures. This is because each individual opportunity has to be taken in its own right, or because a business case has to be built so that the benefits to the company outweigh the cost of implementation, or because it depends on the number of portfolios processed and so on. Mr Powell at SunGuard adventures in giving some estimates. “For a start-up on the low end, the annual investment would be in the range of £32,000 (E46,500) to £35,000 a year, which follows a one-off set up fee of £15,000-£20,000. We can have something up and running on the Apsys bureau solutions within three to six months.” On the other hand, firms can implement Apsys themselves and run it in-house. “The solution is based on a number of modules and users, but we are talking anything from £80,000 to £90,000 in a licence, up to £1m for very large users,” says Mr Powell. But the outsourcing version can get quite expensive, too. “If you are processing tens of thousand of client portfolios, the pricing can get in the same region as the in-house,” he says. Cost varies enormously, echoes Lord Calum Graham at Advent. He says his company has sold the same product to two-man IFAs (independent financial advisers), who bought their own wealth management system and became distributors themselves, as well as to businesses with several hundreds account-facing asset managers and to companies managing up to £12bn. For a two-man shop, the cost is in the region of £15,000 and about £8,000 for installation and training, he says.