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Building the consolidated wealth management platform, understanding the stakes

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August 26, 2017 - The heads of today's wealth firms — as well as their CTOs, COOs, and product and strategy leads — all face structural challenges that are straightforward enough to diagnose on paper. Namely, they must move from a legacy environment with multiple disparate systems to a single consolidated platform. And they must do so using modern relationship-based management for full visibility and access. That's how it looks on paper. Reality has a way of complicating the challenge, however.

To appreciate the current predicament, it helps to revisit the circumstances that produced it. Over the last couple decades, new products kept coming online — SMAs, Rep as PM, Wrap, UMA, UMH. This proliferation of new offerings created pressure to get to market, leading many folks to decide, "Let's bring in a new platform to service this product and that one." And so it went until you had very siloed infrastructures.

In 2008, more adjustments came as the market for wealth advisory services crashed — and crashed hard. Because advisors are paid on assets, a lot of firms were seeing 30-40% declines in revenue. There was simply no investment dollars. Industry players were just trying to survive. Infrastructures in general became rusty.

A chance for overdue improvements

After several years, a chance for major and long-overdue structural improvements materialized. Suddenly, firms were of a mind to say, "Let's consolidate our platform." The clear driver of this change was a desire for efficiency and cost savings. Without consolidation, trying to implement an enhancement would require making that change multiple times across multiple platforms, and ensuring the data ties together. By nature, that's going to be a slow and expensive undertaking.

Another push for consolidation arose from the desire to get a full picture of the client's assets. Having 10% on one platform and 30% on another makes it hard to report or talk to a client with any reasonable degree of confidence that the data is timely or accurate. The challenge of structural consolidation and integration has traditionally been viewed in the context of either efficiency (reducing costs in the form of technology infrastructure, platform fees, and operational overhead) or data aggregation (eliminating silos to achieve household views).

But meeting these longstanding challenges is no longer enough. Today, major industry “disruptors" — in the form of new, well-integrated, single-platform players — have created a new higher obligation. At the same time, multi-platform players' investment-dollar constraints are preventing them from keeping up with speedier competition.

The operative word here is complex. When multiple platforms are involved, this means multiple integration points and the continual fetching of information from disparate endpoints, followed by normalizing and consolidating information into a single consistent presentation. As solutions go, this is difficult, and if achieved, adequate only for a period of time. Layer in system enhancements and the ongoing investment-dollar needs climb steeply based on the number of platforms.

Moving with the times, or else

Wealth advisories, if they don't want to be disrupted out of business, need to find a way to effectively meet current robo, DIY, digital advisory service-level expectations. Right now, it's already clear clients want a feature-rich experience that keeps evolving and improving. It's that simple. The only question is who's going to be around to celebrate the change, and who won't.

In order to move quickly and maintain a feature-rich experience, cost and time will continue to put pressure on organizations to move to a single platform for investment offerings. Even if the complex integrations are achieved, one must ask: Is the information consistent? Timing of market data updates and night processes often leave data inconsistent and not “client ready" for instantaneous distribution.

Ultimately, keeping information from multiple platforms harmoniously updated and synced is an impossibly cost-prohibitive task. That's the force behind the impetus to move to a single-platform future. It's a future where a family can make one change to their financial picture and have the rest of it holistically and harmonically updated in real-time. As we talked about in a recent blog, it's a future where both short- and long-term (e.g., college, retirement, vacation) planning all happen interdependently when and where they directly and indirectly impact one another.

Ultimately, the simpler the infrastructure, the simpler the integration. And simpler infrastructure often means a need for less accounts, as the single platform should accommodate more complex multiproduct structures in UMA and UMH offerings.

This blog is co-authored by Boaz Lahovitsky, Senior Vice President, Wealth Management and Katherine L. Maher, Vice President, Wealth Management Product Development

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