Technology firms are increasingly collaborating to meet the needs of their client base. Both vendors and their customers, including wealth managers, stand to benefit.

For an industry so attached to its history of prestige, stability and conservatism, today’s world maybe feels a little out of synch for wealth managers. Much is said about the sector’s historic reluctance to adapt to technology and its status as a back market in innovation. But change it must.

Wealth managers must look at change as consistent and more broadly applied to their businesses than before. Fortunately, this new world does not just place the responsibility on the wealth management sector itself to lead and deliver change and that is none more so evidenced than it is in technology.

In a more connected world, the sector’s supporting actors must also step-up to the plate. Vendors need to start delivering on their claim they are now partners, not transactional product shops.

Their clients, the wealth managers, want access to best-of-breed, they want new developments faster, they want it easier than before, to better connect to their existing infrastructure and more. They have become more demanding by need.

Against this backdrop, we are seeing more partnerships, collaborations and developments from vendors to the sector, and specifically from technology and consulting players. The many firms now serving the sector are helping wealth managers meet their growing array of business needs and demands and, additionally, preserving their own relevance in the market. They must change too. 

Where once many vendors wanted to rule the roost on their own, fully owning the relationship and service to the client, and saw other vendors as competitors, we now see increasing collaboration. It is a market necessity.

Better together?
The reasons for these developments are multiple and depend on the need. It could be about building out their technology capability, plugging a specific gap, reaching new markets, segments or previously inaccessible opportunities, or perhaps about scaling their reach or delivery capability. 

Ultimately, with broader needs among their client base and with increased professionalism among vendors, when they cannot deliver it all on their own, they would be better served by working with partners to win business.

Technologically too, as well as the market demand, there is an increased connectivity capability. Vendors have been long been forced to connect but it has been painful, expensive and requiring heavy maintenance. Today the tools exist to smooth that process.

That is not to say there are not challenges and risks. Not all partnerships have worked well. The first challenge is in identifying the right partner. Due diligence is a must. However, success then comes down to a mix of key factors which might include: a clear strategy, goals and expectations, ongoing commitment and alignment of interests, making it a win-win for all parties, strong communication and interaction and a clear contractual framework.

Looking forward, the process of vendor partnership will become increasingly sophisticated in structure, process and depth. Technology capabilities are dictating that as are the needs and demands of wealth managers. 

Many examples, growing by the day, include:

• additiv and Orange Business Services: partnered to co-deliver a wealth management as-a-service offer
• Focus Solutions, BITA Risk and Investment Software Ltd: partnered to develop a new offering in the UK called WealthHub
• Ortec Finance: a member of the Avaloq, Deloitte and Salesforce marketplaces 
• FIS: a technology giant in financial services but works with partners in the US like FirstRate, Trizic and Wealth Access when in need of best-of-breed solutions

Benefits for the buyer
For wealth managers, the benefits can be multiple. There is likely to be one clear counterparty with a broader range of capabilities behind it. The opportunity to access a best-of-breed offering through partners is higher. 

There is also the potential to reduce the normal hurdles experienced in technology installation, maintenance and development as the vendors are likely to do a lot of the packaging themselves and should be incentivised to do so. Upgrades, at least, should be coordinated among the partners.

As the market moves forward, wealth managers will experience far more of a supermarket-like feel to their engagement with their suppliers. They might increasingly start to ask: why go Betamax when they can go Netflix? The next question might be who is the Netflix of wealth management?

This article was originally written for and published on the Financial Times' Professional Wealth Management website and published on July 19, 2019. A link to the original article is here: https://www.pwmnet.com/FinTech/Fintech-on-Friday-Vendors-partner-up-to-meet-needs-of-wealth-managers