In thinking about the client journey, firms also have to decide which services they are going to provide, and whose model they are going to use to provide them. In some cases, the new entity will want to outsource some of its services or eliminate a portion of its technology stack.
Hiatt says that having two different wealth management technologies running concurrently isn’t always a bad thing, because it offers advisors choice about which system they work with and how. He points out that as a “most-in-one” technology platform, Orion tries to give advisors the flexibility to work with the third-party technology providers of their choice. Ideally, all wealth tech providers will play well with others.
The Data
Serial acquirers and technology platforms have already stepped up to solve many of the software problems faced by advisors changing firms. Companies like Envestnet, Orion and Practifi offer robust education and training platforms to get transitioning advisors up and running on new applications, Zuczek says.
But that doesn’t solve the problem of what to do with all their old data. These advisors have likely spent years recording, storing and using massive amounts of data about clients and their investments. This information can be used to power everything from investment decisions to marketing automation. Yet this rich and important data the advisors have spent so much time developing won’t automatically flow into an acquiring firm’s new software.
“All of this technology should already be able to talk to each other, it’s just a matter of processing or translating the data so that the new platform can read the information that was being used by the older platform,” Zuczek says. “That sounds easier than it is in reality. What often happens is that two firms that are supposed to be integrating run concurrently on different, siloed platforms for an extended period of time.”
Regulations
When it comes to data, regulation can hold advisors back just as much as unfamiliar software, particularly as they continue to move toward the independent world. Regulators often limit the client information that advisors can take with them, keeping it to bare necessities like names and addresses, which means breakaway advisors might have to go through the discovery, planning, implementation and investment processes over again, says Zuczek, creating frustration and sowing distrust of the underlying technology.
“One of the biggest issues we encounter is around the data aspect,” Hiatt says. “Do you own the data anymore? Is it transportable and can you get to that data? In some cases, the firms can, and in others they cannot. That ends up being the single most important question [for] how long and difficult it [is] to transition and integrate, the ability to own and move the data and control where it resides.”
This will continue to be an issue as advisors keep moving to the independent channel. And according to Hiatt, from his perspective as a software executive catering to the advisor world, that trend hasn’t slowed. “We talk to a lot of firms, and one of the larger firms we work with has announced that they intend to double their M&A activity next year. For the well-capitalized acquirers out there, there’s going to be a lot of opportunities.”