Don’t let outdated technology derail or disrupt your next acquisition

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.

Using technology to grow your business

A combined firm typically looks for ways to share resources and increase efficiencies following a merger or acquisition. While technology has the potential to impede growth—in instances where there are disparate systems, workflows, and other incompatibilities—tools, and roadmaps that are well-synced and aligned can catapult combined firms far ahead of competitors. 

Post-deal firms should consider the impact that more significant client constraints and preferences around cash allocations, restriction equivalents, and target overrides, for example, can have on their business. “Taking the approach to move as quickly as possible to get rid of what isn’t needed, even if [it] seems like the exercise can be done later, often pays dividends overall,” notes M&A consulting firm, Alpha.

The right tech solution can make or break your firm’s organic and inorganic growth plans as you seek scale, talent acquisition, and improved advice delivery. 

We can help you find the best solution for building your business, using technology as a catalyst for growth.