Professional Adviser: Consolidate or complement? Five things to consider when evaluating your tech stack

Allie Carey outlines five considerations for consolidating or complementing a firm’s wealth-tech stack.

When talking about consolidation within the wealth management industry, many people jump to M&A and the benefits of firms joining forces.

But when it comes to specific resources—like technology—consolidation can take centre stage.

Regardless of whether a merger is the catalyst to tech stack consolidation, it's always important to consistently evaluate your tools for value and gaps.

If your tech stack isn't aligned, workflows can quickly become fragmented, leading to more errors and hiccups for clients and potentially affecting customer retention. Here are five considerations for consolidating or complementing the wealth-tech stack.

Disparate data

A crowded technology ecosystem can lead to disparate data sources, impacting opportunities for automation, operational efficiency, and an end-to-end customer and colleague experience.

Evaluating the tech stack for areas of similar functionality and features can identify where consolidation makes sense—with the potential to decrease points of needed integration, error-prone manual entry, and a choppy swivel-chair process.

In the same vein, adopting technology that can replace multiple tools can help solve for the single source of data truth. A cloud environment can provide a platform for unifying, reconciling, and packaging data from multiple sources—and give wealth managers real-time access to customised views and reporting that can fundamentally enhance efficiency and the wealth management experience.

Risk and compliance

A large stable of third-party providers can create a lot of overhead for an organisation, requiring a level of due diligence and relationship management that could burden an organisation. Each additional relationship has the potential to increase complexity, lower efficiency, and have a bigger impact on the bottom line with increased costs—particularly when navigating the evolving regulatory landscape and compliance demands.

Every vendor also represents an additional point of exposure to risk. In a world where cyberattacks are a matter of when—not if, risk management matters. The hit to operational stability and the customer experience can be significant if a provider is critical to data and service delivery.

Scalability and personalisation

Consolidating the wealth-tech stack can not only reduce complexity, lower costs, and break down data silos, but it can also significantly enhance scalability in other ways. Integrated technology optimises systems and often results in better performance, which allows wealth management firms to be able to manage increased workload. A unified infrastructure also allows for better development and faster deployment of technology enhancements, which ultimately benefits the customer.

Many organisations worry that consolidation will diminish or even eliminate their ability to deliver a personalised experienced and customised solutions. Instead of compromising on personalisation, scalability can enhance it. And by creating streamlined processes, firms can direct resources toward their client experience and deliver high-impact, customised service and solutions.

Upcoming transactions

M&A deals are often a driving force for tech consolidation, as they bring together multiple companies' technology ecosystems, leaving teams to determine what stays and what goes. Companies should first assess what it will take to merge their technology stacks effectively. In this phase, it's important to identify and preserve the technology capabilities that deliver a business' unique differentiators to the market. Anything remaining should be reviewed for consolidation opportunities.

A fundamental step in any acquisition is determining how to best integrate an organisation, which applies to the business' technology, too. During integration, there's often duplication of technology, which is arguably an easier part of the tech stack to trim down. Some parts of the acquired technology stack might represent the essence of what made that business attractive for the acquisition in the first place, and these are worth integrating into existing systems. For everything else, it's a question of whether it contributes to the firm's unique value they want to bring to the market.

Managing transformation

When evaluating whether or not it's time to consolidate your tech stack, the actual rollout and communication with colleagues are often overlooked. Change management is crucial, as colleagues need time to learn and practice new technologies, with support resources readily available. By preparing them in advance and laying the groundwork for cultural alignment, organisations can help ensure colleagues are ready to work effectively in the new technology environment.

Communicating what drove this decision and leaning into the benefits enable colleagues to understand how a successful integration empowers them to focus their energy where it matters most: serving their customers and driving business growth.