By Sameera Udayangana Posted on 07.11.2024
Technological change in wealth management has taken a dramatic turn over the past few years, with solutions and apps flooding the market. It finally feels like digital transformation in wealth management has arrived, although it is by no means yesterday’s news!
Indeed, from automating basic processes to using data to offer personalised solutions or quickly adapting to changing market conditions – digital transformation needs to be an ongoing process.
But as revolutionary technologies like AI break through we see front-end technology evolving at breakneck speed. But that has meant that back-end infrastructure is starting to get left behind.
So, how can you bake in an ongoing, future-ready digital transformation process into your back-end technology stack? Here’s our checklist to help you decide if your backend tech stack is helping or hurting you.
#1 Is it scalable, flexible, and agile?
Modular, microservices-based, cloud-native architecture
Does your backend system allow you to deploy high priority feature(s) quickly and cost-efficiently? For example, if you need to automate just your account funding flow, the optimal backend should have the agility and flexibility to go live fast with this feature in isolation.
The ideal backend should allow you to add features at your own pace (e.g., investor onboarding, tax-wrapped products). An architecture that is not modular cannot support this incremental build approach, offering you an all-or-nothing up-front cost. That’s why modular, microservices-based architecture is a must-have.
With the global democratisation of wealth, providers face pressure to scale up. For scalability, cloud-native architecture is the unparalleled option available. It leverages the elasticity within cloud computing, allowing you to scale your infrastructure and resources to seamlessly expand your reach. By using on-demand computing power and storage, wealth management platforms can accommodate growing volumes of data, increasing client bases, and complex computational tasks efficiently at significantly lower operational costs than on-premise deployments.
As you grow, there’s a constant need to build and deploy new features, which requires maintaining additional test and staging environments. Without buying dedicated servers and spending upfront, using cloud-native Infrastructure-as-a-Code (IaC) within your backend system facilitates the provisioning, configuration, deployment, and decommissioning of environments within minutes. You only pay for what you use. Automating this process eliminates manual tasks, reduces human errors, and ensures consistency across multiple environments.
#2 Is it safe and secure?
Enhanced security and data protection
When dealing with highly sensitive personal information, security and data protection are paramount to building trust with clients. To be the ‘Fort Knox’ of your clients’ data, a future-ready backend should offer robust security measures like multi-factor authentication, encryption, secure data storage, and regular security audits. These also need to comply with GDPR and financial industry standards.
While significant resources may have been invested in securing core enterprise platforms from external threats, what happens when “the call is coming from inside the house”? There are various internal users (business operators, system operators, database administrators, etc.) who can access sensitive personally identifiable information (PII) data and confidential financial information. That’s why your architecture should be enriched with advanced mechanisms like data anonymisation and tamper-proofing.
Data anonymisation removes or obfuscates PII from datasets, which protects client identities while allowing valuable insights to be extracted from the data. Anonymisation makes sure that in the event of a security breach, the compromised data is useless to all unauthorised individuals.
Tamper-proofing ensures the integrity and immutability of data by using mechanisms that prevent unauthorised modification or data tampering. This also strengthens the auditability and compliance aspects of wealth management operations.
#3 Is it reliable?
Automated self-testing
With digital services becoming a part of everyday life, users demand high availability and reliability, with little tolerance for interruptions, especially during peak events. Every tax year, when traffic and trading volumes peak amidst the flurry of customers maximising their annual tax-advantaged allowances, providers that miss the mark lose out.
Traditionally, this level of reliability involved significant investments in infrastructure and monitoring tools upfront – including provisioning resources to handle 2.5x of normal activity. However, an optimal wealth platform ensures reliability at a lower cost with continuous monitoring and self-testing.
Continuous self-testing involves implementing automated monitoring and diagnostic tools within the backend. These tools proactively assess the health and performance of the platform, ensuring that any potential faults or issues are detected as early as possible. Any deviation or degradation from expected levels can be identified immediately, triggering automated alerts and notifications. Once detected, a well-designed platform can take prompt and proactive action.
For example, if loads reduce database performance, the platform should automatically scale the database to meet the higher resource demands. Once demand reduces, the platform can release the additional resources. This automated, real-time allocation of resources is a powerful mechanism to keep the system responsive and reliable during peak events.
Self-testing and feedback also lets backend developers access real-life usage data and enhance the platform build process. This iterative approach lets wealth platforms stay ahead of evolving customer expectations and industry demands. For example, if a particular module always takes longer to serve during peak activity, by using continuous monitoring and diagnostic mechanisms, those abnormalities will be fed into the platform build process and improvements can be deployed for better performance and reliability.
#4 Is it aligned with your expansion plans?
Regional intelligence layer
As you contemplate expanding your wealth management offering beyond your shores, the last thing you want is to set up different core backend systems for each geography. The optimal wealth platform should travel with you, with geographical regulatory settings abstracted from your core microservices.
To support this, a modern backend system should be designed with regional intelligence applied as a cross-cutting layer across the platform, allowing for region-specific modifications (e.g., investor rules, tax-wrapper rules, regulatory requirements, etc.) without affecting the platform’s core. This abstraction enables the backend to swiftly adapt to evolving regulatory and compliance landscapes as well as meet specific local requirements.
This flexibility helps you meet the needs and regulatory frameworks of each market while negating the development and maintenance costs of deploying backends at multiple locations.
Your technology and operations staff can benefit from shared learnings and synergies of using the same platform globally, improving their ongoing operational experience. Therefore, your ideal core wealth platform reduces operational complexity, increases speed to market, and reduces firm-wide operational costs and risks.
#5 Is it playing nice with others?
Seamless low code/no code integrations
With more niche applications being needed to help deliver next generation wealth propositions, you need third-party service providers to integrate with your backend platform or face an unwieldy web of disparate technologies. However, integration can be time-consuming and costly — if your platform does not have the required connectivity and architecture.
By adopting open APIs and embracing modular architecture, the optimal backend platform can easily integrate with a range of external services such as KYC/AML providers, banking APIs, custodians, risk management tools, financial data providers, payment gateways, investment analytics tools, and more. These integrations let you leverage the expertise and capabilities of third-party specialists, expanding your offering and delivering comprehensive solutions.
You can also use these integrations to compose a customised, interconnected wealthtech ecosystem with just a few clicks — with your backend platform as its beating heart.
Furthermore, you can leverage backend systems with pre-built third-party integrations to accelerate the development and deployment of new features. This helps you stay ahead of the competition, adapt swiftly to changing customer demands, and provide innovative offerings in a timely manner.
How can we help?
We’ve honed in on these five must-haves based on our experiences battling suboptimal backend systems in wealth management. We find that many wealth propositions still run on legacy core platforms that are not designed for the digital age. These platforms are often slow, inflexible, and difficult to integrate with other systems. With an extensive background in wealth management, our founders have experienced numerous wealth platforms and bear the scars of many abandoned products, failed launches, long delivery times, and ultimately lagging propositions.
That’s why we’ve assembled a team that combines its wealth management experience with the discipline of building mission-critical platforms for stock exchanges to design the WealthOS platform.
Get in touch with shri@wealthos.cloud to find out about how our future-ready core wealth platform can support your products and propositions.