As the financial sector evolves amid market shifts and regulatory changes, technology is a must-have for wealth management firms. Financial technology enables advisors to stay connected to investors. It also allows firms to keep pace with market dynamics, align their practices with new laws, and demonstrate regulatory compliance.

Without financial technology, wealth management firms cannot continue to compete. The right tools ultimately protect firms’ bottom lines, but they are costly to adopt. Understanding the true costs of owning financial technology can help firms plan their investment and consider options for offsetting their tech expenses.

Readily Identifiable Costs

When wealth management firms purchase a financial technology system, there are several obvious up-front costs they must assume. Hardware, whether purchased or leased, makes up a significant portion of firms’ initial technology investment. A hardware investment is not just the purchase of the system itself, but also the additional supplies, materials, and spare parts needed to get the system up and running.

Software is a sizeable outlay as well. When firms buy financial software, they also pay licensing and subscription fees. With both software and hardware investments, firms must also purchase maintenance contracts and extended warranties.

Facilities and utilities round out the obvious costs of owning financial technology. Firms spend on office space for their technology systems, and that space requires furniture. To operate financial solutions, organizations must maintain a network and internet connectivity. The sum of these up-front costs is only a portion of the firms’ total cost of technology ownership.

Residual Costs

The residual costs associated with owning and operating wealth management technology are a combination of human capital and insurance expenses. Wealth management firms that choose to manage their technology in-house must hire implementation professionals to get their systems up and running. Firms then need to bring in technology trainers to support their staff in utilizing the system. They must also hire auditors and inspectors to ensure they are using their financial technology in accordance with government regulation.

Securing financial technology is another considerable undertaking and expense. Firms must invest in insurance for data protection and loss coverage, and it costs them to design and implement risk mitigation plans. To manage data security internally, organizations must pay wages and benefits to data security specialists.

Opportunity Costs

There are unseen trade-offs that wealth management firms assume with the implementation and utilization of financial technology too, especially when they choose to manage technical and security matters in-house. Even with proper planning and mitigation, handling risk can drain resources. In worst-case scenarios, firms can incur steep penalties when security measures fail.

Financial organizations often overlook the productivity that is lost when technology is introduced in the firm. There is downtime during implementation, then troubleshooting, and often some end-user frustration that can shifts an entire organization’s focus away from bottom-line enhancing activities. As firms transition to a new financial technology system, advisors and other specialists can be easily derailed or distracted from their areas of expertise, which costs the organization.

Minimizing Costs and Maximizing ROI

To keep technology ownership costs manageable and make the most of their technology investments, firms should examine their core competencies as well as their non-core competencies and divide and conquer accordingly. For instance, most financial firms have a robust staff of advisors who are excellent relationship-builders. Leveraging the technology in ways that keep them on task, in front of investors, and engaged in building and maintaining relationships nurtures firms’ bottom lines.

Firms should maximize the skill sets of their advisors and other operations professionals while leaving technology implementation and integration, inspections and auditing, training, and data security and risk mitigation to experts outside the firm. Partnering with a technologically advanced solution that understands the complexities of the industry is an excellent way for firms to save some of their in-house technology resources.

A Powerful Technology and Service Solution

The right technology tools combined with superior service can be a winning solution for firms looking to leverage the benefits of financial technology without all the hassles and expenses. First Rate CORE and managed hosting are powerful assets for financial organizations.

CORE is a robust, flexible solution that serves a range of performance measurement and client reporting needs through a user-friendly, web-based console. It is driven by a powerful performance engine that handles all the calculations, data management, and automation to support management, advisor, and investor decision-making. At the heart of CORE’s effectiveness lies APIs, which allow users to pull raw data in real time to solve problems and streamline business processes.

First Rate also provides managed hosting services to relieve firms from the stress of managing technology systems. We are certified to design system architectures to organizations’ specifications to provide data access, disaster recovery, and reporting. First Rate takes special measures to prioritize data security. We undergo annual SOC2 certifications and third-party network vulnerability assessments to ensure the highest level of data security. We also train all our developers and employees in best practices for security standards.

Partnering with  First Rate allows wealth management firms to remain focused on cultivating client relationships instead of maintaining technology systems. In serving the technology needs of more than 250 financial solutions, we have a wealth of experience to lean on when it comes to helping firms make the most of their financial technology investment.