When looking to adopt new technology or digital tools, many wealth management firms fall into the trap of trying to build the tech themselves. On the surface, keeping the development in-house can seem like a way to create a tailored product and have full control over the process and features.
Unfortunately, that’s rarely the case.
Firms simply don’t have the resources or expertise to build technology as effectively as vendors. By relying on in-house products, firms can fall into an innovation gap and end up with less optimal technology, which puts them behind the competition. Let’s dive into why wealthtech firms can’t compete on their own and how vendor partnerships can help.
Building Tech Comes With a Learning Curve
One of the biggest barriers to building robust technology in-house is a lack of skills and experience. Wealth management firms typically hire for skills related to financial aptitude, the ability to work with clients and experience in the field. And while many technology skills can be learned on the job, there tends to be a wide gap in skill levels between firms that hire a single employee or small team to build technology or try to learn as they go and vendors with a large team of experienced, proven employees who are connected and dedicated to that world.
One study found that 64% of financial services leaders lack internal expertise in regtech, APIs, cybersecurity and data flow — all crucial elements of technology platforms. Firms need a robust financial technology strategy, but most lack the resources or experience to dedicate to building and implementing one. And if they do allocate an in-house team to building technology, that often pulls resources away from other crucial client services.
Innovation Is a Full-Time Job
Building technology isn’t a one and done project. After building the initial platform, teams have to continually make updates and adjustments to tailor workflows, integrate new technology or find innovative solutions to ensure the platform is still effective.
That means that wealth management firms need a dedicated tech support team long after the initial build. But that can be costly and time-consuming, especially when in-house teams are competing against vendors with large dedicated teams to drive fast wealthtech innovation cycles. The speed of development and execution of vendor teams far outpaces in-house development, meaning wealth management firms risk falling behind or using outdated or ineffective technology. Trying to keep up with the competition with limited talent also incurs significant costs and operational risks, which can result in a substantial amount of time and money being spent on a suboptimal product.
Partnerships Give Firms Access to Strong Tech
When it comes to technology, partnerships are far more efficient. Instead of having to reinvent the wheel or build every platform and function from scratch, development teams can collaborate and work together to get faster, more innovative results.
Those partnerships can happen between wealth management firms and vendor development teams. The firms bring an expert understanding of their workflows and clients, and the vendor brings expertise in technology and the best features to help the firm reach its goals. Instead of working in isolation to build a platform in-house, firms can partner with established vendors to leverage their knowledge and resources.
Firms often think that building technology in-house is a guaranteed way to get a customized product at a discount. However, partnering with a vendor is the far superior option for firms to stay competitive. Instead of playing catch-up with an in-house team, vendors help firms lead the charge with high-quality technology.
For integrated technology for RIAs, there’s no better option than Docupace. Purchasing software provides instant access to top-tier compliance processes and automatic updates. Buying a product allows you to rest assured that you have the best product and can focus on what matters most: your clients.
When you’re ready for new software, turn to Docupace for a full-service, integrated platform. Click here to download our Buy vs. Build guide to see how smart firms move faster with less risk.
