Lego’s modular approach can teach financial services a thing or two

09 April 2019

At the turn of the century the Lego brand was in trouble, posting big deficits and flirting with bankruptcy.

Since then it has become the world’s most powerful brand and the biggest toy company in Europe and Asia, with sales also booming in North America,[1] while The Lego Movie 2 recently hit cinemas.

It’s a story of revival and reinvention to inspire any business. But there’s another aspect of the Lego brand that other sectors and businesses can learn from - the effectiveness of the modular approach to building products and services.

One of the big trends in the world of architecture is the rise of lego-style construction, in which buildings are made up of independent units (i.e. kitchens, bedrooms) that fit together like lego blocks. The companies that specialise in designing and building the independent modular boxes present architects with different options to choose from, allowing them to develop properties to specification.

It’s not a new idea - modular forms of architecture have been around for decades (the prefab buildings of the post-Second World War period being an obvious example). But what has changed is the technological advances that have opened up new possibilities around modular approaches, particularly in a world in which flexibility and choice are increasingly valued.

The modular principle applies in financial services as much as any industry, with wealth management a classic example. The traditional one-size-fits-all approach to client services propositions retains a hold over many in the sector. We still see too many service providers forcing square pegs into round holes by making the client’s proposition fit their own.

But it is an increasingly outdated model in a world when technology enables services to be moulded to the needs of clients and not to the limitations of the business.

People have higher expectations of service, communication and delivery than they used to, yet elements of the wealth management sector are taking too long to adapt. More and more clients value flexibility and tailored services and are less likely to tolerate the ‘factory settings’ approach.

A company outsourcing operations to a service provider invariably seeks flexibility, expertise and a relationship that is dictated by their needs and not by the preferences or limitations of the partner.

Every company has its own way of doing things, its own priorities, its own needs and objectives. It is entirely logical that service propositions are built with those characteristics to the forefront and not as an afterthought. Above all, they are making the investment and their name is on the proposition - they want to retain a high degree of control, because they know their business better than anyone else.

This is one reason why an open architecture philosophy is becoming far more popular to wealth management firms who are looking to revamp or build new platform services. Open-architecture support services for wealth managers, private banks, family offices and advisory businesses might include: investment administration, tailored technology, custodian services and client reporting. When firms work with platform service providers that offer open architecture, they will naturally look to suppliers that are able to demonstrate a deep understanding of the sector and experience of working with a huge range of firms through project managing transformational change.

Returning to our Lego theme briefly. You can easily buy a kit from any toy store that will allow your children to build something simple with an easy to follow instruction book. But what you’ll end up with will be the same as everyone else who has bought the same box. Your imagination is limited to the types of bricks you’re supplied with and the end result will probably look nice, but it won’t be personal. So, if you want to build something special and unique, you’re going to want to employ a Lego master builder (yes, they do exist) who has the necessary expertise and access to all those ‘special’ bricks that you can’t just buy off the shelf. In wealth management terms, this translates to a project management team that has the necessary skills and know-how to help you construct something truly special. That project manager must be able to evidence their ability to deliver to your exacting specifications. That means they’ll need to be able to integrate suitable technology solutions through APIs and demonstrate they have access to specialist tools and services required for the job.

The ability to customise your build is also important. A wealth manager might require custody services, compliance support and investment administration, but not technology support or reporting services. In which case, that’s exactly what they should get. It’s a modular and flexible approach that delivers compelling propositions allowing firms to differentiate themselves in what will invariably be a competitive and crowded field.

Staying on the same theme. If you’re paying an architect to design your dream house you would expect to work with them to create your vision, not theirs. You might make modifications based on their expert recommendations, but ultimately you would stay in control so that what you end up with, through the project management of an expert in your corner, is what you set out to achieve.

Businesses are entitled to the same expectations in our industry. They are often working with very complex needs, not least in a wealth management sector caught in what can feel like a regulatory whirlwind. They need support that makes life easier for them and for their clients.

They appreciate it too when the pricing structure is transparent, the plan is clear and the process is efficient.

In working with businesses to build our services around their needs, we place a premium on honesty, transparency and collaboration. In other words, we aim to ‘play well’ - which also happens to be the Danish mantra that translates into the ‘Lego’ name.

[1] https://www.wearesonder.com/how-lego-became-the-worlds-most-powerful-brand/