Technology innovation and advances have led to significant changes in how business gets done in many industries — including wealth management. Much as the markets change, so can the technology that is relied upon by family offices, independent registered investment advisors, and others. These platforms and solutions, as well as the developers and vendors that deliver them, also experience different cycles and growth spurts, which can be influenced by external forces.
In the wealth management ecosystem, everything is connected. The wealthtech trends we hear about today don’t just affect tech companies; they have a big impact on the overall wealth management industry — and affect how wealth managers serve and engage with clients.
Some of the key trends taking place in the wealthtech space — in particular, how they affect family offices, which often need to take on more tasks across a smaller client base than other types of practices — include:
In 2022, the wealth management industry broke the record for mergers and acquisitions deal activity — for the 10th consecutive year — according to Echelon Partners. Although deal flow has decreased slightly so far in 2023, it remains robust, with strategic acquirers and consolidators backed by private equity continuing to expand their reach. For family offices and RIA teams that make the transition to a new acquirer, this can mean a short- or long-term freeze on tech spending.
Like any acquirers, private equity firms may look to cut costs at RIAs and family offices, where possible. And if a private equity firm that acquires a wealth management practice isn’t in the wealth management or wealthtech industries, they could be more likely to pause spending on new or upgraded technology. I can’t tell you how many times I’ve worked with a broker-dealer, RIA or family office to onboard them to my firm’s tech platform, only to have that onboarding stopped when the customer has been acquired. Wealth management firms may also freeze technology spending, at least temporarily, after an acquisition initially closes.
For family offices and other wealth management companies in the midst of an acquisition, make sure your acquirer understands the importance of technology to your business and engagement with clients before a deal progresses. If at all possible, address tech spending in the terms of the deal in order to avoid a long-term freeze.
Some wealthtech providers offer practice and portfolio management ecosystems that bring previously siloed data together — from across the financial services industry — into one place. These wealthtech vendors empower advisors and wealth managers with real-time insights they can use to improve decision-making, strengthen engagement with clients, and automate reports and analytics.
The secure sharing of data in these huge data repositories can also make it easier for advisors and wealth managers to create data-driven recommendations for clients, and identify nontraditional products, such as loans and annuities, which can be incorporated into clients’ portfolios.
In addition, centralized data repositories can help wealth management practices and wealthtech platforms alike to run their operations more efficiently by quickly identifying bottlenecks in the transfer of information or other workflows, and utilizing artificial intelligence to speed them up through automation.
More and more wealthtech solutions and platforms are being promoted as “end-to-end” tools that can take care of everything. This is driven in part by the ongoing increase in wealthtech providers and products, and by the push toward digital unification and addressing customers’ broad needs. Although many of the tech platforms available today do vastly different things, the “end-to-end” moniker can make it difficult for advisors and wealth managers to accurately identify which is best for their business and clients.
When evaluating potential wealthtech vendors, it's up to advisors and wealth managers to conduct rigorous due diligence and carefully examine the platforms and what they are designed to accomplish. Begin by identifying the primary pain point you’re trying to address, and which vendors can address that. Many vendors do many things, but few can do many things well. Tech vendors will typically be strongest at their initial solution offering. If they started as a workflow provider, they will always be good at workflow. They may expand into additional functions, but workflow will remain their strength. Critical areas you will want to dive into include identifying what tech areas the vendor specializes in or how much time you will be able to save with the solution.
Family offices and smaller independent RIAs may not have the same tech needs or infrastructures as their larger counterparts, but today’s wealthtech trends are impacting the entire industry. As the wealth management industry continues to evolve, thanks to tech innovation, advisors will continue to strive to understand how to harness these changes—so they and their clients can benefit.
Bobby Powell is vice president of distribution sales at iPipeline, a provider of comprehensive and integrated digital solutions for the life insurance and financial services industries in North America.
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