Greater than the sum of the parts.
FinTech innovation and the need for agile, flexible wealth management operating models means technology providers should combine forces to create valuable services..
The wealth management sector is changing and those managers able to spot opportunities and adapt quickly are likely to prosper. But to do so, they will need a flexible technology infrastructure which allows them to be agile and integrate new services.
Regulatory change, generational wealth transfer, the rise of impact and ESG investing, client expectation regarding high-quality digital engagement, the trend towards remote working accelerated by Covid-19; all play a part. Successful wealth managers will adapt to these changes by accessing the right technology tools and exploiting them effectively.
Fortunately, we are seeing the emergence of exciting new technologies with capabilities designed to meet these changes. These applications and tools are often more limited in scope than traditional systems but are highly effective in providing the specific capabilities managers may need.
The challenge for the wealth manager is to integrate these new tools alongside the traditional systems to create a platform that allows the business to adapt effectively to change. With this mind, an important goal of technology providers should be to help wealth managers by improving how their products and services can work together.
Flexibility and agility are key
Two factors need to be considered.
Different wealth managers require access to a different set of technological tools at different points in their development cycle. As such the technology infrastructure supporting them must be flexible enough to adjust to changing circumstances.
In addition, no systems provider is able to supply all the tools to effectively satisfy the full needs of any single wealth manager. Therefore, the infrastructure supporting the manager must be agile enough to accommodate different providers and different technologies working alongside one another.
Whilst established, monolithic technology systems have some advantages, stability being one, they are generally unresponsive to change and difficult to integrate with new technologies. Furthermore, their ability to adapt to the needs of individual clients, especially those at the smaller end of the market, is limited. In sum, they can be like large ships. Hard to change course and expensive to refit.
In contrast, FinTechs that focus on solving specific problems for clients and are uninhibited by ‘technological debt’ can adapt quickly to changing circumstances, maintain efficient product development cycles and support individual customer needs better. The nature of these companies allows them to launch solutions quicker and to do so more cost effectively than their larger counterparts.
Technology companies should ensure their products and solutions can operate in conjunction with those of other providers to create valuable flexible and agile technology platforms for wealth managers.
The challenge here is to ensure the different specialist tools any one wealth manager may require provide the best balance of stability, flexibility and agility, and work effectively together to create integrated, efficient systems.
One size (does not) fit all.
In recent years we have observed an increasing need for wealth managers to access a mix of technological tools provided by different providers. One size rarely fits all and what ‘mix’ is right for one wealth manager may not be right for another. The challenge is threefold.
Firstly, to identify and select the correct technological and provider mix to support the individual wealth manager. This is not only to satisfy their existing capability requirements, but to ensure they have the right tools to take them through the next stage of their growth. Whether that be to increase AUM, launch new products or target a different client segment.
Secondly, to ensure the various different technology systems (both new and legacy) are integrated effectively to provide the wealth manager with a seamless experience and an efficient operating platform. This integration challenge is significant and requires the development of constructive partnerships between providers, as well as the core technological capabilities required to integrate several component parts into one coherent whole.
Thirdly, to adapt the technological mix on an ongoing basis by adding, removing and adapting individual component parts dependent upon client need, with minimal restrictions from factors such as licence terms etc. This element is critical. As businesses grow and as the external environment changes, so too must the mix of technologies that is made available to the wealth manager. Ensuring a continual assessment of client need, matched by the ability to change and adjust a client’s operating platform is vital in delivering client value for the long term. If neglected, the efficient technology system of today quickly becomes the legacy technology system of tomorrow.
When designing wealth management operating platforms comprising several different components from differing vendors it is preferable to start with a focus on the collection, management and security of data. Get this right and the exploitation of that data through different specialist tools becomes far easier.
An effective approach can be to build a flexible architecture around a core, data model, whether that be a central Investment Book of Record (IBOR) or other data store. This data model forms the nexus around which a flexible architecture can be built, and other tools integrated. It also supports the open, flexible and customer-centric propositions valued by the wealth management sector and allows new technologies to be incorporated on an ongoing basis, without the need for wholesale change.
The infrastructure supporting the manager must be agile enough to accommodate different providers and different technologies working alongside one another
Solutions into a service
The integration approach takes best-in-class technology solutions, developed by market-leading technology companies and turns them into client-focused services. Services that are configured to client needs and that adapt and react as clients grow, and technologies develop.
This approach is most successful when individual technology companies work collaboratively together in formal or informal partnerships. Learn from each other. Identify ways of complementing other technologies and integrating their solutions with them.
Looking across the financial sector, we have observed a clear trend of increased collaboration and partnership between technology companies. We are also party to several ourselves. The sharing of expertise in order to provide better value to the end customer. This trend is likely to continue for some time. It should be embraced.