The Long Road Ahead

TL;DR

• Integration is the first step towards data consolidation. We are at the beginning of a complex and challenging road ahead.
• Integrations are solving yesterday’s problems, today. Most advisors seem content with stopping there.
• Data gets no love because it’s deemed operational. Tech is not in an advisory firm’s core competencies so it gets outsourced to non-technical outsiders, or worse, it gets shelved.
• Creating flexible processes and a flexible ecosystem is essential for future firms’ success.

Let’s peel the onion back a layer and make it easier to conceptualize why today’s core wealth tech stack isn’t built for automation and efficiency. In the previous post I mentioned that single use tools aren’t the answer. Advisors have all the tools they need, yet there is an efficiency problem. Single use tools present two main challenges: most don’t integrate and the underlying data does not match. A dispersed tech stack creates dispersed data sets, pretty simple to understand. We operate in a giant, tangled data mess, keep adding fuel to the fire, and hire more staff to manage the data without fixing anything.

It’s hard to convince wealth management firms the importance of operationalizing and standardizing data. The wealth management industry has long under invested in operations. Data has been labeled as operational, so it gets no love. Plus advisors are in the wealth management business, not tech! Their competencies aren’t suited to leverage data to allow their businesses to scale. Also, most advisory firms aren’t large enough to have a tech team on staff, or a COO to focus on data strategy. Some outsource the wealth tech stack to consultants, others to their TAMPs. The problem is, they aren’t integrating the tech stack to your business. They research products, and provide the tools they think advisors need to drive business. They’re building the tech stack from their global view (all sub-advisors need X), and leaving it to the advisory firms to optimize their local tech operations. It’s up to the advisory firms to develop processes and integrate the tech stack for their team (buy the tool box for all the tools provided, example from previous post). Most advisors don’t realize this because they’ve long been out of the “operational” side of client service and their core competencies are not related to tech.

When will advisors realize that they need to re-gear their practices and get ready for the steep road ahead? A road where those who have dialed in their data processes win. Data is the new oil; we’ve heard that too many times. Unrefined oil (disorganized data) will get your firm nowhere. It has limited value until it’s processed and can fuel your firm.

High-quality data is imperative for integrated systems to function effectively. Garbage in, garbage out holds true for data. Poor-quality data will impair the use of AI, leading to misguided decisions (when the time comes). Before firms can focus on AI, they will need to standardize data management and focus on processes; the boring stuff. Firms have built complex processes that fail in small ways. Then adjust as needed rather than assess the whole process to understand why it keeps breaking.

Slight tangent but here’s a generalized way most advisors (or planners) operate:

1. Synthesize: Advisors operate in the current wealth tech stack; all fragmented, not integrating. To start a planning task, they have to gather the dispersed data needed for a certain task and combine it (mentally, or physically depending on the task).
2. Extract: Once it’s combined, advisors can model scenarios and extract the insight needed using whatever tool is best for the task.
3. Visualize: Clients understand visuals, so advisors distill the complex planning scenarios into simple visual illustrations that their clients understand (translate jargon to the client’s language).

Every advisor does a general version of this – some go deeper, some stay high level. Regardless, all advisors (and planners) collect client data, extract what they need, and visualize it for clients. A lot of responsibility is placed on the advisor and their teams. The current wealth tech stack, for most, doesn’t integrate (red line below). So advisors are forced to refine the data before they can draw any insight from it.

We are at the stage where it’s time for a complete overhaul. Disparate tools and lack of seamless integration have created fragmented, low-quality data. Zapier automations seem to be the best answer today. But again, this is table stakes across other industries. Integration only solves for the red dotted line in the image above: connecting fragmented systems so advisors can manage today’s operations. Even then it’s up to advisors and their teams to understand and reconfigure data to complete financial planning tasks.

Wealth tech companies innovated by building “features” rather than products. This is a problem across the board – we’re seeing new AI Agents built to solve for hyper-specific objectives. Lukas Petersson’s blog does a great job explaining how the AI landscape is developing. The current winners will be obsolete when future, more robust products reach the market.

There are a lot of similarities to where AI is at today and where the wealth tech stack is at today — terrible comparison as I take a step back, but wealth tech is still in its infancy (like AI). Wealth tech products are constrained, pre-defined, acceptable. They are good enough to get today’s job done. As we move towards a future where integration is normalized, advisory firms ahead of the curve will realize that future tech not only requires integration, but consolidating the underlying data. Refined data that matches across the tech stack, is flexible, and can be drawn upon for deeper insight.

Integration is step one, and the industry is moving towards this. Yet most advisors think this will be the answer to their problems. Integration will not help them draw insight; that will still be in the advisors direct line of work. Technology needs to integrate AND be flexible on command. Technology needs to connect all financial planning tools, draw insight from each other, and use its data sources to formulate calculated responses based on the prompt provided. It’s on the advisor to understand the client relationship, and on technology to compute based on the known variables to provide insight on command. How can we achieve this? By thinking about tomorrow.

Most of the wealth management industry is okay with the current tech stack, so they disregard innovation. We’re solving for integration; integration is only the beginning. Once we integrate the tech stack, we’ll only have validated what we already know: data doesn’t match, rendering it useless. Firms will be scrambling to solve the data management problem.

We work in an industry with complex systems; systems that rely on multi-step processes. Complex processes are unavoidable. But today’s processes are linear in a non-linear industry. Each advisor, firm, and SaaS products have different priorities around data, and different processes for managing it. Every relationship is different; the behaviors and personalities of both, the client and advisor, completely alter how they work through linear processes. On top of that, the data comes in different formats (PDFs, meeting notes, emails, etc.) which can’t be read and disseminated automatically into the current wealth tech stack, forcing manual operation. Advisory teams deviate from established processes to meet the clients’ needs. Deviating from established processes, even when needed, creates wrinkles in the process down the road. How do other team members know what’s been done, and what’s left to do?

Our processes and the tech we use is not flexible enough to deviate and respond to the non-linear world we operate in. Organization exists in our brains. Information in our brains cannot be processed by others. We’ve overestimated the ability of our processes and underestimated how complex they are. Forcing team communication to be a top priority, leading to more emails and brain fog to organize.

A hard reset is needed to reframe, rethink, and rewire the way we operate. We need to think in systems: those of today, and those of tomorrow. Most wealth management firms are building their processes based on past experiences. Which is fair, but consider that you may be building on a broken foundation. We’re at a breaking point where forward thinking firms may benefit from starting from scratch and seeking counsel from data experts. If there is one take away from this post, its this: integration is the first step towards data consolidation.

-Erik

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Here’s what wealth management firms can do today:

• Integrate where possible; even if it means cobbling together the fragmented tech stack with Zapier automations. Focus on the simple integrations that are accessible, don’t think about it too much.
• Think before you act. Many advisors are used to manually exporting and working through things the “quick and dirty” way. It’s in most advisors nature to deliver quick solutions. Take note of how much you’ve normalized operational friction.
• Stop underestimating the complexity of firm processes. Document your processes or review existing processes to better understand the current breakpoints. Avoid documenting what you want your processes to look like; be honest with yourself if something is not working today.
• Focus on collecting quality data. Notetaking tools, like Zocks.io, do a good job of summarizing notes and saving you time. Leverage AI, but don’t forget about quality control. Remember, garbage in garbage out.