Technology Disruption Driving M&A and Partnership Activities in Wealth Management

Discussing business graphs

At the recently held Deals And Deal Makers Summit, hosted by ECHELON Partners, I was fortunate to moderate a panel of technology executives discussing technology disruption in wealth management and how it is impacting mergers, acquisitions, technology partnerships, and capital raising.

Based on the success of the independent advisory space, massive technology investments are currently being made to take advantage of the growth and opportunity as automation finally makes its way into the once sleepy corners of wealth management. Known as a laggard in technology adoption due to its historically conservative nature and regulated structure, financial services firms are now opening up to the latest innovations to reduce costs and provide a better client experience.

The Secrets of Technology Disruption and Their Impacts on Deal Making session focused on identifying the key lessons learned from technology disruption and how those will play out in mergers, acquisitions and technology partnerships by technology newcomers, existing wealth platforms, and legacy providers.  These concepts include such paradigms as, “What can be automated, will be automated” a methodology that is very much playing out in real time. We’re seeing this through new technology integrations designed to remove manual processes inherent in service delivery, improving accuracy and timeliness, and reducing costs in a much more competitive and regulated environment.

Additional disruptors driving industry activity are “breaking existing pricing paradigms” and “employing game changing user interfaces.” The early success of the robo-advisors is rapidly commoditizing investment management services from 100’s of basis points based on assets under management to basically zero – Schwab’s robo-advisor is “free.” Combined with elegant interfaces from new players that work well on mobile devices and can showcase an aggregated view of the client’s total holdings, it is no wonder that many of the early robo-advisors have been acquired by the big online brands.

Blackrock, Invesco, Fidelity, and UBS are just a few of the well-known, established firms that are investing hundreds of millions in M&A deal making to acquire these new capabilities vs. building them in-house to remain competitive and on the forefront of technology delivery.

Further lessons learned from technology disruption include the concepts of “targeting younger and tech savvy client segments first,” to gain early traction, which has been exactly the game plan for the first wave of the robo-advisors.

According to panelist Michele Feinstein, Director of Client Technology for Pershing Advisor Solutions, “By the year 2020, an entire generation, ‘Generation C’ (for connected) will have grown up primarily in a digital world. Computers, the Internet, mobile phones, texting, social networking, peer collaboration will all be second nature to members of this group.”

The implications of this for advisors and the industry will be far-reaching, as Millennials now make up the largest population cohort in the US and world-wide. “What this really means is that their preferences for communication, technology experiences, thirst for information and demand for services will have to be the top priority for future development,” Feinstein concludes.

As a result, expect further M&A activities to happen as legacy firms look to acquire these capabilities, new entrants gain market share and advisors look to reinvent themselves by adopting the latest client experience technologies.

According to Dan Seivert, CEO of Echelon Partners, additional forces that will drive mergers, acquisitions and partnerships in wealth management will be from the DOL’s new best interest, fiduciary requirement. His lively discussion in a debate format will be the feature of our next blog post, coming soon.

Timothy D. Welsh, CFP® is President and founder of Nexus Strategy, LLC, a leading consulting firm to the wealth management industry, and periodically blogs for Advent’s On Point blog. He can be reached at or on Twitter@NexusStrategy.





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Posted in Advisors, Asset Managers, Technology, Wealth Management

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