[Advisorpedia] Build a Tech Stack or Buy It? The Calculus Has Changed Dramatically

Written by: Joe Stensland | BridgeFT

Amid all the market uncertainty this year, it has not been surprising to see many financial technology companies grow as advisors and broker-dealers move to upgrade their technology stacks to adjust to the increasingly complex needs of their clients. When it comes to getting the best tech stack for your wealth management business, firms usually start with one critical decision: Do we build it or buy it?

It may be the wrong question.

The age-old dilemma of whether to buy or build was based on several factors. On the one hand, building a custom stack from scratch gives firms a level of control that works best specifically for their business. Yet, building is very often expensive and time-consuming, and there are other hurdles. For instance, integrating data, particularly from custodians, can be more difficult than you might think.

So, that leads to buying, but this, too, has its problems—namely that it can be limiting for firms. Many tech platforms offer an all-or-nothing solution that is hard to tailor to individual needs. You get what you get, whether it’s right for you or not.

However, the equation is changing, particularly for firms seeking differentiation through next gen wealth management applications. The ability to offer a more-scalable platform is possible, so long as you know the end audience.

The best wealth management firms and wealthtech application providers–the ones who are looking to differentiate their offerings from the competition–look for a partner that can help integrate their tech stack, reduce complexities, and improve both the client and advisor experience.

For wealth management firms and wealthtech application providers, custodial data is the lifeblood of their business. But until recently, it was difficult for firms to access this information because they had to build separate feeds for each custodian, a costly and time-consuming proposition. But with new technology, wealth management firms, wealthtech companies and registered investment advisors (RIAs) can transmit and process information directly from custodians in a frictionless way while also integrating data through different sources through a single API. 

That’s just one example. The increased use of APIs to ease integration and access to critical data and applications is allowing for a level of customization for wealthtech platforms that essentially let you buy off the shelf but tailor specifically to your needs in a seamless way. Development times have gone from upwards of a year, to weeks, even days, based on the nature of the application. The hurdle of outdated data infrastructure is now being worked around daily. 

That’s good news for everyone building wealth management applications. The build vs. buy option is quickly becoming a false choice. You can still have access to a ready-made platform, but the innovations within are making platforms more scalable and customizable than ever before.That means you don’t have to build it or buy it. You can envision what you need and know there are partners who can support your firm’s critical need to differentiate your offerings from the competition, whether you are a wealth management firm or a wealthtech application provider. That will give you a critical edge in both supporting and winning new clients.