The wealth management industry of today moves fast and requires technology to keep pace. The pandemic exposed companies that had outdated technologies, requiring them to update or become obsolete in the eyes of their clients, advisors that work for them, and support staff. FinTech software directly contributes to sales and positions the company as cutting edge and ahead of the competition.
While the wealth management industry emerges from COVID-19, statistics from McKinsey suggest that companies using advancing technologies will bring in as much as 50% more revenue by 2023. Technology is a critical differentiator:
“The attraction is obvious: the value that leading companies have captured by shifting to digital business models. Moreover, two-thirds of companies expect that the digitization of their core businesses will be (or already is) essential to remaining economically viable. Only about 8 percent of companies believe that their current business models will remain viable if they don’t digitize. But making the shift to digital requires not only upgrading your IT and tech infrastructure, but transforming your entire business model through creating, or even becoming, a software business (in whole or part), scaling a software offering, or using software as the core of your competitive edge.”
While becoming a software company by creating your own may sound appealing, some misconceptions exist about proprietary software and the overall strategy of achieving a viable product. Often, there are few successes and lost development monies that will never recoup. Sometimes even the best are not successful when it comes to developing software. McKinsey outlines some common misconceptions when it comes to software development and ROI:
1. It’s an engineering transformation. Often, people think it’s software engineers that makes the software and company successful—it’s not. Product management, organization, marketing, and engineering are all involved in successful software. Beta testing with actual advisors to work out the ‘kinks’ must occur along each step of the development plan both inside and outside of your firm—are you willing to open Pandora’s box of your software?
2. You can hire a few leaders and overhaul your IT department to develop software. You will need a lot of talent, so be prepared to hire up to 4 times what you have now that is software-development focused only. Your current IT may be cable slingers and software installers, not full-enabled developers that come with a resume full of successful employment in development—and a heavy yearly salary.
3. You can scale by acquiring small players. Buying smaller players is indeed one way to scale because they often have more substantial performance outcomes than large deals. But, when a non-software company purchases a software company, this approach seldom works.
4. You can rely on your current sales force and relationships to produce revenue. Selling software is different from selling other products. Your sales team may not have the technical expertise to convert prospects into software customers. The deal size will likely be small compared to your core business which, for RIAs, is the business of providing advice and managing wealth.
At AdvisorPeak, our team includes the most experienced support and development team in the industry. While we appreciate the entrepreneurial spirit of developing your software, we know what it takes to develop and market trading software successfully. We encourage you contact us and try AdvisorPeak today!