The combination of the longest bull market on record, fears of recession, and possible election year volatility may be concerning investors ahead of 2020, but it presents a tremendous opportunity for wealth management practices and home offices to demonstrate value, and differentiate themselves, to clients and prospects. However, at the same time, financial advisors are also under pressure to adapt to evolving regulations and meet client expectations regarding fee compression and digital engagement.

An approach that has been gaining traction lately is the idea of “platform consolidation.” By consolidating multiple technology applications and systems into a single, unified platform, firms can reduce operational overhead, lower costs, facilitate scalable growth, and perhaps most importantly, optimize advisors’ ability to construct portfolios based on client goals. Unifying tech silos can also streamline and simplify workflows to monitor regulatory compliance and manage risk. But, while many advisory firms understand the benefits of platform unification, the actual process of implementing this initiative is often perceived as a daunting, complex, and costly undertaking.

Ironically, the goal to provide more options for creating client portfolios has been one of the main drivers for wealth management practices and home offices winding up with so many disparate technology applications. As new investment solutions emerged, technology solutions were developed to enable advisors to harness them for clients. The too-common end result was an advisory firm with many unintegrated “silos”. When technology programs operate separately and independently, portfolio and client management processes ultimately become less flexible overall, as well as slower and more cumbersome to manage.

This also makes it more difficult for advisors to provide clients with a goal-oriented, streamlined, seamless, and personalized experience they have come to expect. The lack of technology platform integration can prevent advisors from delivering holistic, goals-based financial advice in an efficient, real-time, and comprehensive manner.  

Optimizing Your Tech Stack

With these shifting client expectations, an increasing number of firms are seeking to unify their technology applications to generate the efficiencies and enable meaningful capabilities and client engagement to make such a business model possible for financial advisors.

When an advisor’s front, middle, and back offices are all connected via a single tech platform, all workflows encompassing the implementation and execution of investment decisions are shortened and simplified, and advisor actions and guidance can be comprehensively reported to clients in real time. In addition, myriad home office functions – including overlay portfolio management, back office operations, and compliance oversight – are streamlined and made more efficient.

According to Celent, firms that implement conversions to a unified technology platform are generally seeking to cut operational costs by at least 20 percent. That’s a tall order, but in our experience, we have found this objective can be met if firms ensure their integrated system achieve certain characteristics:

• A cohesive, streamlined end-to-end solution that fully integrates front-, middle-, and back-office operations as well as data and workflows along the entire portfolio lifecycle for all advisory programs. 

• The capability to scale in order to accommodate long-term future growth.

• An open-architecture platform that is product-agnostic.

• The flexibility for home offices to set different levels of advisor autonomy and customize program controls regarding who can do what across the entire investment process.

• The capability to integrate technology without affecting program offerings and/or enabling the firm to manage change that impacts advisors and clients

• …which creates the ability to implement consolidation gradually, according to the timeline most conducive to the practice.

Every advisory practice is different, and firms should look for a technology partner with a proven track record who takes the time to understand what they want to achieve as a business—and how platform unification can help them make those goals a reality.

Beginning The Process

The hardest part of a big project can be getting started. A logical place for firms to begin is to make a list of the various programs they have added to over the years, including advisor-driven discretionary and non-discretionary, fund/ETF wrap, UMA and SMAs.

Next, evaluate the legacy technology systems where they reside, and evaluate the benefits of a single tech platform first, separately from considering consolidation or streamlining of programs.  The right tech partner can enable firms to consolidate and simplify the tech with or without making changes to advisor/client facing programs.

Evaluating Technology Vendors

When seeking a partner to consolidate portfolio management and trading platforms  into a single, unified solution, firms should examine whether or not prospective vendors have the flexibility and scale to accommodate their strategic growth plans. Furthermore, it is important to ensure a chosen partner has a proven successful track record and will be able to provide robust support throughout the relationship—long after the initial onboarding is complete. Firms should ask prospective vendors for client case studies and best practices to evaluate the track record and fit of the potential partnership.

Below are some additional criteria that we have found useful for helping advisors choose the ideal vendor:

• Does the provider’s solution deliver the flexibility to make configurations at multiple levels – program, advisor, segment, etc.?

• Is the solution capable of fitting into your business needs and desired workflow for home office and advisors, or would changes need to be made to fit the technology?

• Can the vendor’s technology accommodate multiple custodians and recordkeeping systems (for example, brokerage and trust accounting)?

• Does the technology enable fully automated onboarding?

• How modular are the software and services being offered?

• Does the provider offer additional services such as outsourced overlay portfolio management, back office operations, and model marketplaces?

Success Factors: Always Keep The End Client In Mind

Regardless of which technology provider is chosen to undertake platform unification, firms should aim to keep the vision of the ideal experience for end clients as their guiding “north star” throughout the process.  From our experience, other success factors include:

• Realistic expectations – including timeline, cost, level of effort, etc.

• Deeply detailed roadmap and set of requirements

• Adherence to disciplined program management and governance to include all key stakeholders

• Thorough testing and release management protocols

• Timely and transparent communication across internal stakeholders and external tech partner(s) throughout the project

• ….and most importantly, involvement of some of your advisors every step of the way from design, to implementation, through to training and rollout.  Not only does this ensure adherence to the “north star” but it also creates ambassadors who can provide valuable testimonials and help to facilitate the broader rollout and adoption.

With the right partner and the right process, the implementation of integrated tech platforms supporting your advisory offerings will help to mitigate regulatory risk, create operational inefficiencies, eliminate confusion and miscommunication between advisors and clients, and allow your advisors to better meet clients’ expectations, and facilitate scalable growth for your business.

Rob Klapprodt is corporate strategy officer for Vestmark Inc., a trusted partner to some of the largest and most respected players across the wealth management industry.