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Major technology initiatives almost always require at least some change in the way employees work, and sometimes, trigger even bigger changes to corporate culture.NicoElNino/iStockPhoto / Getty Images

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Canadian wealth management firms are under pressure to transform their technology platforms because investors are looking for a level of seamless, personalized service that can only be delivered with the help of sophisticated digital tools.

At the same time, a combination of competitive pressures, changes in financial markets, and rising client expectations are imposing new demands on advisors, putting those with the best technology platforms at a big advantage.

Most wealth managers in Canada don’t have capabilities sophisticated enough to meet these evolving needs. As a result, firms are either in the midst of a major technology transformation initiative or planning one.

Given the stakes, it’s understandable wealth management firms might want to go all in and revamp their entire technology platform from top to bottom. However, when embarking on this transition, it’s best not to go for a traditional “big bang” overhaul that transforms the entire technology stack at once.

Instead, firms should adopt a more flexible and easy-to-implement architecture and approach with componentized solutions. A componentized strategy has the potential to enhance results quickly across all business metrics including customer experience, advisor productivity, assets under management growth, operational efficiency, and profitability.

Component-based solutions are isolated to specific functions or areas of the business. This trait allows firms to target high-priority initiatives narrowly without disrupting the broader operational ecosystem.

The nature of component solutions also makes them relatively easy to implement. As a result, firms that adopt this model can rack up quick wins that start delivering cost savings and revenue growth rapidly and with minimal risk.

Benefits of an incremental approach

In a componentized configuration, the firm and its technology partners focus first on building an enterprise integration layer that provides a foundation for the entire technology stack. This layer will serve several critical roles.

Specifically, it will allow component solutions to connect easily to the platform and communicate with both the overall network and each other. Application programming interface enables additional components to be integrated into the platform easily and effectively.

The foundational platform will provide data-management capabilities that enable the free flow of reliable and consistent data across the system and organization. By establishing a framework for sound and efficient data governance, the technology platform will allow the firm to harness the power of data analytics, robotic process automation and AI.

By providing both seamless communications and effective data management, the platform will enable firms to integrate applications such as customer relationship management and financial planning tools fully with the core operational system. That will create direct workflows, an ability that will generate efficiencies for clients, advisors, operational teams and the entire organization.

Minimizing risks

Once the foundation is in place, wealth management firms can turn their attention to implementing capabilities for specific business functions. That’s where the benefits of a component-based approach manifest the most.

From this point, the componentized platform is fully customizable. Firms are free to focus on whichever business functions and technology applications they deem most important in the order they choose.

Some firms might prioritize technology that enriches the client experience. Others might start with planning tools that eliminate work and free time for advisors, or new digital tools that can drive end-to-end processing efficiencies that support operational modernization and result in increased productivity and reduced costs.

Critically, all these capabilities can be implemented individually, minimizing, or even eliminating any impact on other systems. That means firms can transform their technology stacks incrementally.

Traditional “big bang” projects posed more risk. They were expensive, took a long time to execute, and the sheer scope of the undertaking increased the odds of implementation issues and other snags. A component-based approach reduces these risks by breaking transformation into a series of smaller and more manageable steps.

Managing strategic and cultural obstacles

This approach minimizes risks beyond the purely technical. Any change in technology requires a corresponding adjustment to workflows. Technology transformation eliminates some tasks altogether and can alter the set of skills and expertise required to complete other core functions.

As a result, major technology initiatives almost always require at least some change in the way employees work, and sometimes, trigger even bigger changes to corporate culture.

Large-scale technology overhauls are often delayed or undone by these strategic and cultural obstacles.

Transforming technology through a componentized, incremental process gives the organization flexibility with the time to focus on working through priorities and address changing market needs. This can lead to a thoughtful implementation plan that ensures incremental value to the firm, advisors and clients.

Incremental transformation also helps firms manage another issue that can undermine technology transformation initiatives – alignment. The accelerating pace of change makes it difficult for organizations to ensure that the perspectives and priorities of their business units and technology teams are in alignment.

Employing a component-based strategy in which systems are transformed sequentially gives firms the time to review results at each step in the process to make sure the overall system is meeting the needs and goals expected.

Wealth management firms can also have greater success when their teams are collaborating and working with external partners with deep industry expertise.

Working with a provider with experience in both technology and wealth management can help guarantee that firms’ technology and business strategies are following the same roadmap.

More broadly, a partner with a foot in both worlds can help wealth managers get the most out of a component-based strategy by helping them set the right foundation, align with the right priorities and select the right component applications.

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