While deal value and volume may be cooling off from scorching highs in 2021, buyers and sellers of wealth management businesses are still actively looking for deals. In addition, technology is an increasingly important factor, with potential buyers and sellers evaluating the capabilities and compatibility of firms’ tech stacks.
Meanwhile, wealth management clients continue emphasizing holistic advice. Clients expect advisors to provide more than a financial plan and investment management. They want comprehensive services, estate and tax planning, and well-vetted connections to top-tier accounting and tax preparation professionals.
Advisor platforms are the conduit for these connections and services, so it’s of utmost importance that when firms consider merging with or acquiring another firm, they evaluate the counterparty’s technological infrastructure, data security, expertise, custodial compatibilities, and how integrations are initiated and maintained.
Technology can seal the deal—or spoil it
By 2030, the wealth management industry is expected to grow by $250 billion. As technology facilitates scale and retiring advisors sell their books of business to new advisors, the wealth management landscape will continue evolving over the coming decade.
“Human-enriched, digitally enabled delivery models will prevail in wealth management, and it will be M&A that becomes the catalyst for the ultimate success in those areas,” according to a recent report from Bain & Company. The right technology and workflows can provide returns of “up to 35% higher” compared to a “traditional” wealth management delivery model. But to fully unlock those margins, firms need to assess and ensure they have the right technology.
Growing firms need solutions that support multiple sub-advisory firms, reducing complexity and giving advisors autonomy in their practices. They should probe for data breaches or cybersecurity vulnerabilities in their potential acquisition target or counterparty. Flexibility is crucial when adapting to new systems following a merger or acquisition, so the firms best situated to utilize multi-custodial platforms and have a history of supporting integrations through either in-house technologists or close support from third parties.
These game-changing tech considerations can seal a potential deal or spoil it. And with technology “increasingly driving advisor decisions,” advisors must prepare today for tomorrow’s opportunities.