How To Think About Buying Wealth Management Technology

Tom Burroughes, Group Editor, February 17, 2021


A checklist
Like a good pilot, having a strong, clear checklist is essential.

“There are several key questions to ask, including: is the solution proven with other wealth managers in the market? How frequently does the partner run on/over time and budget? How have they successfully managed previous implementations? How will the solution evolve to meet future needs and what investment does the partner make annually into development? And does the provider have individuals I can see myself working with in times of pressure?” said SEI’s Williams. 

What can firms do to negotiate the competition among vendors for their business and how can third parties help?

“In many cases, external help can support a selection process by removing historic or legacy attachments to previous decisions and therefore levelling the playing field. It is important, however, to ensure that expectations are clearly communicated from the outset and not projected by the consultant and that any existing relationship between the consultant and the vendor is understood. It is also important to resist the temptation to be driven by superficial pricing. If you don’t challenge, consultants can focus too much on a number rather than the long-term value of a proposition and the total price [needed] to achieve your objectives,” Williams said. 

A report last year by T3TechnologyHub, run by Joel P Bruckenstein, organizer of the annual Technology Tools for Today (T3) Conference, drills into the buying and tech usage habits of wealth managers, and it unearths a number of important trends. For example, the report (2020 T3 Inside Information Software Survey Report), found that there’s a “generational shift happening in the fintech space, which would appear to reflect a shift in service models”. It said that younger advisors are more likely to use financial planning software than older ones, and fee-only advisors are more likely than advisors working in the brokerage world. Younger advisors are also “less likely to use asset management software, reflecting a slow but potentially tectonic shift from the AuM revenue model (and a portfolio management value proposition) to flat, retainer or subscription fees (and a financial planning value proposition). This transition is first becoming visible in the financial technology choices made by advisors,” the report said.

The T3 report also noted that a “growing number of advisors are augmenting their financial planning calculation engines with specialized (tax planning, social security analysis, medicare analysis) tools, which offer a deeper dive into a topic than the planning tools do currently.” The report said financial planning firms are starting to add their own versions of specialized programs.

One cautionary note from T3 was its surprise at how wealth advisors are still not great users of document management and cybersecurity tools, notwithstanding oft-publicized stories about privacy breaches. 

“Why? We can’t give you a good explanation, but there appears to be a lot of opportunity in the enterprise content management space. Last year we documented our surprise that so few advisors were using cybersecurity solutions, and the market share numbers have increased this year - but only to around 7 per cent of all respondents. Let’s call cybersecurity another category of opportunity - both for providers and also for advisory firms that have been slow to adopt,” it said.

Advisor360’s Napolitano argues that one important tech feature to think about is the “master agreement.” These gather data and information on clients in one place so that firms don’t need to keep asking the same clients the same questions when executing their business.

There is a challenge for firms to deal with the sheer range of offerings out there, he added. “It is hard for a lot of these [wealth management] entities to handle all the technology development.”


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