Think about the last time you integrated a new firm into your company… Was the technology integration smooth? Everything went as planned. You knew when things would happen. It was easy to allocate resources. Or, was it filled with unexpected bumps and roadblocks? The schedule was unpredictable. Staff had to be pulled away from other key strategic projects. You didn’t have experts for the platforms you were working with. Most wealth management firms would say the latter. And with a significant amount of growth in wealth management has come inorganically—either through breakaways or acquisitions (Family Wealth Report reports the last three years have each seen more than 300 M&A deals), a lot of firms are dealing with a chaotic experience.
Merging companies means merging and synchronizing technology as well, a process that is often complicated, time consuming and difficult to manage efficiently. The acquired firm usually has a different technology platform than the acquiring firm and aligning the systems is both necessary and thankless work. Fortunately, outsourcing key activities can reduce the pressure internal teams feel during the synchronization.
Challenges Associated with Synchronizing Technology
The process of synchronizing technology during a merger is complicated and stressful because firms don’t know the specifics of what the effort will entail, when it will happen, or how long it will take to complete. And, it’s hard to incorporate into the strategic plan and staff appropriately. Hiring full time staff for this type of inconsistent work isn’t cost effective. Using existing team members takes resources away from other important strategic projects that the firm needs to grow and deliver on client experience.
Leveraging Fractional Resources
Whether it’s once a year or once a quarter, wealth management firms involved in mergers and acquisitions or breaking away into new office set ups can smooth out technology transitions by outsourcing the work to WealthTech consultants. These firms achieve a number of objectives including:
- Matching the exact expertise and experience to the project to make good decisions the first time
- Avoiding implementation delays and saving time overall to get the acquired firm in action quickly
- Managing the process cost-effectively by utilizing the right level of support on a short-term basis rather than hiring full time teams for work that ebbs and flows
- Freeing internal teams to work on other important strategic projects and revenue generating activities
- Having an advocate who can ask the right questions in vendor conversations as well as taking advantage of their economies of scale in negotiations
Where in the Process Outsourcing Can Help
Each technology transition is unique and the support is customized to the wealth management firm’s specific needs. WealthTech consultants can come in at any point in the M&A process to relieve stressed teams or fill holes in talent needs.
The earlier outsourced experts enter the acquisition process, the more value they can deliver. Bringing a team in during the letter of intent stage allows them to conduct a needs assessment, provide strategic guidance on the technology transition and develop a scope of work. Once the merger is complete, the implementation phase can quickly ramp up because the outsourcing firm will be prepared to staff the project appropriately.
Smoothing M&A
Given the retirement rates of advisors and the perceived benefits of independent advisors, it’s reasonable to expect the trends of M&A and breakaways as a major contributor if industry growth will continue over the next five years. By outsourcing technology transitions, bringing two firms together can go a lot smoother than most executives would imagine.
When you’re ready to pave the way for a smooth integration effort, get in touch.
