In this conversation, Darren Tedesco, President of Advisor360°, and Jennifer Sawan, Senior Director of Sales Engineering & Operations, dive into the critical "Build versus Buy" decision facing technology leaders in wealth management. They explore the pros and cons of building in-house technology versus investing in ready-made, scalable solutions.
With insights drawn from their extensive experience, Darren and Jennifer discuss how choosing the right approach can impact operational efficiency, client satisfaction and growth potential for firms looking to remain competitive in a fast-evolving industry.
Jennifer Sawan
Today, we're going to discuss some of the biggest questions in wealth tech—build, buy, or bolt-on. As firms look to scale, the technology decisions they make significantly impact growth, client satisfaction, overall success and cost structure.
Darren will share his insights on these critical choices and the broader trends shaping our industry. Darren, thank you so much for joining us today.
Let’s start with the big picture. Why is there so much emphasis on whether to build, buy or partner on technology in the wealth management space?
Darren Tedesco
Before I even answer that, I would step back and say you’ve got to look at the pain points in wealth management firms today. Looking at the competitive landscape, everyone is competing heavily for recruiting and retaining advisors.
There are interest rate fluctuations, fee compression, compliance, regulatory and info-security challenges, along with rising investor expectations. All these factors create significant challenges for wealth management firms to stay competitive.
They know they need to invest in technology to align with these demands, all while costs, including employee costs, are rising. Firms are really looking at how they can create a productivity platform for their end users.
Jen: What are some key considerations firms should keep in mind when it comes to building technology from scratch?
Darren: When you and I were at Commonwealth Financial Network, we looked at it similarly. There are some pieces that are worth building, others worth partnering on and some worth buying. I think this mix exists for most companies. It depends on which elements you want to own as part of the platform experience, which are non-differentiating and which might need customization without the overhead of managing the IP. For most firms, a mix of build, buy and partner—or bolt-on—is essential for a successful strategy.
Jen: I remember some of those decisions focused on more complex financial calculations. That’s where we thought, “Why reinvent the wheel? Let’s partner with a firm that specializes in that.”
Darren: Exactly. As you look at some of the commodity elements like a document management system, it doesn’t make sense for any firm to build from scratch. With companies like Microsoft, EWS and Box.com specializing in those areas, you’re better off focusing resources on elements that support your specific business goals, rather than on undifferentiated technology.
Jen: Let’s talk about buying technology through acquisitions. What are some common pitfalls firms should avoid?
Darren: Acquiring a firm comes with many challenges. Integration issues in the wealth management industry have led to many acquisitions that ultimately didn’t amount to much. Often, the people who created the IP are gone and those left may not understand the technology well. Integration requires a strong plan and understanding of culture fit. Large firms may be better equipped to handle this, but it’s not for the faint of heart. I generally recommend building or partnering over acquiring for most wealth management firms.
Jen: It often feels disjointed across products acquired over time, impacting brand and client experience.
Darren: Precisely. Creating a cohesive user experience with acquired assets is difficult. A strategy that combines partnerships and builds can better avoid a fragmented user experience.
Jen: Many firms add technology by partnering or licensing. What best practices should they follow to ensure success?
Darren: My first suggestion is to do your homework. Talk to people in the industry, especially those using the vendor’s solution. Understand their strengths and weaknesses. Everyone has pros and cons, so it’s essential to get an unbiased perspective to find the best fit for your firm.
For the full “Build vs. Buy” conversation, watch the full video here to gain deeper insights into technology strategies that can drive growth and enhance client satisfaction in wealth management.
