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General Published on: Fri Feb 10 2023

Cracks In Technology Got Deeper With The Consolidation Wave


IT Infrastructure

Consolidation wave hit the Wealth Management Technology space in 2015. Even though mergers and acquisitions were rampant, new players and changing technology landscape widened the technology gaps due to incompatible technologies, resulting in fragmented IT infrastructure.

To plug the gaps, firms felt the need for better integration between different software acquired by a firm. This, we feel, compounded the problem even further.

The systems already in place in large banks were outdated legacy systems, which didn’t sync well with the modern front-office solutions, where the customers can now access information through multiple channels. This, along with the fragmented technology in general, posed a huge problem to the financial institutions looking to collate all the moving data pieces in one place and present an accurate, comprehensive, and up to date view efficiently.

Why is ‘integration’ not the long term solution?

The integrations or the adapters fixed the immediate need for data flow across the systems. In a broader sense, having an integration pipeline based on multiple such connectors added to the chaos.

The Core Problem

At Hexaview believe that the core problem lies in how the custodians store and share client data with portfolio managers or financial advisors. Every custodian has a different format for representing data, and there is no-followed standard. The same data is stored in different tools like the Portfolio Management System, Financial Planning Software, Trading Software, etc. Every software in the Wealth Management life cycle must interact with the custodians at one point or the other. This software boasts of having connectors to hundreds of custodians.

And this is why integration fails…

The Solution

FinTech companies need to understand the importance of open architecture & embrace data representation standardization across these product lines. The way XML changed the game by enabling heterogeneous software systems to interact, a standard way of representing transactions, positions, accounts in a technology-independent manner, would dramatically change the scene of wealth management integration services.

Therefore, we need to find alternative solutions to the problem. Instead of finding ways to work around the issue, we need a long-term strategy to fix the issue while not forgetting that many new players are entering the FinTech world every day.

How to achieve “THE SOLUTION”

After studying the various stakeholders and systems in use today, the basic architecture should have two most important pieces:

Core central EAI (Enterprise Application Integration System) & GDW (Global Data Warehouse).

These should serve as the only sources of TRUTH for all applications used by front end systems to back end systems. All data would originate from here and would terminate here. The GDW becomes our Data house, and all the applications pull the data as and when required from the GDW and save the data back into the GDW, which gets stored therein a standard format. This way, the interaction between various tools or systems would be through the GDW, which ultimately would make it possible to bring all data in one place & a common format.

Here is a diagram to explain better:

All data would originate from here and would terminate here.


Other Advantages

There would be multiple benefits to such an arrangement:

  1. It would provide accurate and most up to date results across channels with no possibility of Data mismatch across various tools or systems.

  2. Advisors shall be able to perform across-the-board analytics considering that complete spectrum of information would be available at one place.

  3. Enable to create better and custom tailored investment products for the clients.

  4. Shifting from one vendor to another would be much easier and less error prone. This way the financial firms would never have the feeling of being stuck with a particular system/vendor and can adopt to new generation products easily.
  5. Many times Vendors stop supporting older versions of their own products which hurts the most. With GDW in place, migration headaches would be a thing of the past.

  6. Reporting would be easier and highly cost effective since all financial data would be stored at central repository with an open architecture, which would ultimately make reading data extremely easy.

However, every big shift of technology leads to some spill-over effect. In the absence of any standard in representing information, having a single source of data could be tough and might involve high costs. It would be similar to developing a platform and integrating it with the vendor’s Off-the-shelf products. It certainly would be wiser to shortlist a vendor based on their offering’s open architecture and its ability to get easily integrated to the firm’s GDW. Hence, instead of being a special feature, compatibility with the GDW in a system would become a pre-requisite.