Build vs. buy: Why wealth managers should take a hybrid approach – Global Banking And Finance Review

By Mark Trousdale, CMO and EVP at InvestCloud

Whether to buy versus build your technology has been a longstanding debate in financial services and wealth management. And for much of that time, it was largely still a debate worth having with pros and cons on both sides. For example, historically, it was hard to achieve differentiation and control with purchased solutions. Nowadays, however, the right technology partner can provide wealth managers with scale, differentiation and control, without the inherent inefficiencies, risks, and costs of building in-house. A modular approach is critical to allow wealth managers to get exactly what they want, where they want it, and then use the technology as a differentiator.

Selecting the right technology partner makes this possible. And business realities are driving much of the industry to realise that building is no longer needed nor advisable. Hence the debate is heading toward a clear consensus towards buying. Nevertheless, some in the industry are still resistant due to historically poor experiences.

Cultural resistance to change

A lack of knowledge translates into fear of losing control – especially among larger wealth managers. A lot of this is down to how technology has been traditionally delivered. It has been monolithic with large chunks that have ended up being clunky, inflexible and not fit to deliver differentiation. As a result, there has not been a sufficient degree of control over the buying organisation that rightly wants to ‘own the last mile’ and provide something that stands out from the competition.

A feeling of the problem being insurmountable also adds to resistance. In the past, legacy technology that relied on hard coding meant technological transformation was expensive and risky. With these legacy technologies, it has been far too easy for technology projects to take on a life of their own. Many failed to deliver on the original imperative that drove the investment decision, and even more were binned before they were delivered.

Sometimes technology teams can feel like turkeys voting for Christmas when it comes to advocating buy over build because they feel their jobs are at stake. However, a healthier way to look at this is that they can be a part of the larger value chain of digital transformation, working in tight partnership with the technology provider to design and engineer the future state. They also play a crucial role in integrating new solutions with the in-house technology environment. Not to mention, by focusing away from slow and inefficient application development through hard-coding, these teams can focus on higher and better uses of their time – such as digital strategy.

The real ROI benefits

Real-life imperatives – notably the need to improve business processes and functions …….