Is legacy tech holding back financial services?
The financial services sector is undergoing a significant digital transformation, yet many firms continue to rely on outdated systems that hinder growth, innovation, and the ability to provide superior client service.
As client demands become more technology-driven and regulatory pressures intensify, modernising legacy systems is no longer a mere technical upgrade but a strategic necessity.
Sibusiso Mbingo, the Chief Information Officer at glu, shares insights into the approach that organisations can take to overcome the challenges posed by legacy systems and navigate this critical transition.
Legacy systems on financial operations
Legacy systems have long been a thorn in the side of the financial services industry. As Mbingo explains, “Legacy systems have long been a significant challenge in the financial services sector.” These outdated platforms have impacted operations in several significant ways:
- Lack of integration: “Data silos and manual workarounds slow down underwriting, claims, and onboarding,” which creates bottlenecks in core processes.
- Rigidity: “Rigid systems struggle to adapt to evolving business models, regulations, and customer needs, delaying innovation and product launches.”
- Outdated infrastructure: “Old systems drain IT budgets, diverting funds from strategic priorities like digital transformation and AI.”
- Security concerns: “Inadequate support for modern protocols heightens cyber vulnerabilities and complicates regulatory compliance.”
To address these challenges, Mbingo advocates for adopting a phased modernisation approach. “We implemented a phased modernisation approach to reduce risk while enabling gradual transformation.” This phased approach includes a cloud-first strategy: “By adopting cloud-native solutions, we’re improving scalability, resilience, and cost-efficiency.” Additionally, automation and API-driven architecture streamline operations, while modern IAM frameworks strengthen security.
The strain on wealth management and advisory firms
Legacy systems are especially detrimental to wealth management and advisory firms, where the demand for personalised, data-driven services is at an all-time high. Mbingo explains, “Legacy systems are increasingly seen as a strategic liability in wealth management and advisory firms, especially as client expectations shift toward real-time insights, personalised service, and holistic financial guidance.” Here are a few key ways these outdated systems hinder progress:
- Fragmented data: “Advisers spend significant time manually reconciling data, slowing onboarding, trade execution, and reporting. This erodes profitability.”
- Limited asset tracking: “The inability to track illiquid assets like private equity and real estate creates blind spots in risk assessments and financial planning.”
- Lack of scalability: “Legacy systems lack the flexibility to scale or integrate with new market demands, causing innovation to stall.”
In contrast, organisations that have embraced modernisation gain significant advantages. “By adopting cloud-native platforms, unified data layers, and automation,” Mbingo says, “organisations gain agility, reduce operational drag, and unlock adviser capacity for high-value client engagement.”
Overcoming integration challenges
Integrating new technologies into existing legacy infrastructure is fraught with challenges, but it is essential for ensuring that financial institutions can meet the demands of modern clients. As Mbingo points out, the hurdles include:
- Fragmented data: “Disconnected platforms hinder real-time insights and a unified client view.”
- Inflexible architecture: “Monolithic systems resist integration with cloud, APIs, or AI.”
- Security risks: “Outdated protocols expose firms to cyber threats and compliance gaps.”
- Operational inefficiencies: “Manual processes drain advisor productivity and delay service delivery.”
To mitigate these challenges, organisations must adopt a strategic, phased approach to modernisation. “We take a phased upgrade approach to avoid disruption,” says Mbingo. “Middleware, or 'API bridges,' connect old and new systems, ensuring seamless integration.” Additionally, cloud wrappers allow legacy functions to gain scalability without a full rebuild. Modern IAM frameworks have been implemented to strengthen security and compliance. Mbingo adds, “Modern IAM frameworks, including MFA and domain segregation, strengthen our security posture.”
Technology in enhancing client relationships
The digitalisation of financial services is reshaping how wealth managers and advisers engage with their clients. As Mbingo puts it, “Client expectations are now the primary catalyst for modernisation.” Clients now demand 24/7 access to their portfolios, real-time insights into their financial performance, and rapid turnaround times for advice and transactions. Legacy systems, which often rely on paper-based workflows and on-premises data storage, simply cannot keep up with these demands.
“In response to these demands,” says Mbingo, “the industry is focusing on shifting to cloud-native platforms to support real-time access and scalability.” Modernisation also allows firms to invest in intuitive client interfaces, such as responsive mobile apps and client portals, which empower clients to access information and interact with their advisors whenever they need it.
This shift not only enhances client satisfaction but also reduces the workload for advisers, allowing them to focus on providing more personalised, high-value advice. “By breaking down silos and streamlining onboarding and reporting,” says Mbingo, “we can deliver more responsive, tailored services.”
Mitigating risks and maintaining a competitive edge
Legacy systems pose significant risks in terms of security, data protection, and operational efficiency. Mbingo describes these risks in stark terms: “Legacy systems aren’t just inconvenient; they’re a liability. They expose organisations to security breaches, compliance failures, and operational drag.” Most legacy systems suffer from weaknesses such as:
- Weak security: “Old platforms lack modern encryption and access controls.”
- Compliance gaps: “They struggle to meet evolving data regulations.”
- Operational inefficiency: “Manual workarounds slow service and inflate costs.”
Firms must take a proactive approach to mitigate these risks. Mbingo suggests that “smart organisations mitigate risk without losing momentum by phasing in upgrades, using APIs to bridge old and new systems, and wrapping legacy functions in cloud services.” By strengthening IAM and automating compliance workflows, firms can safeguard client data and maintain a competitive edge while modernising their operations.
The future of technology in wealth management
Looking ahead, Mbingo sees the role of technology evolving rapidly. “Technology is moving from back-office support to front-line enabler,” he says. Real-time analytics, cloud-native infrastructure, and AI-driven automation are reshaping how wealth managers deliver value to clients. Personalisation will be a key component of this transformation: “Unified data and behavioural insights will allow advisors to provide tailored advice that resonates with clients.”
Moreover, Mbingo predicts that the future of client relationships will be defined by “faster turnaround times, deeper personalisation, and omnichannel engagement.” Modern platforms will enable firms to scale their advice models while maintaining high levels of service quality. “Operational efficiency will increase as manual processes are reduced, freeing up resources for innovation and growth.”
For many firms in the financial services sector, modernising legacy systems is not just about staying competitive; “it’s about building a foundation for trust, growth, and resilience,” Mbingo concludes, “and ensuring that they’re equipped to navigate a rapidly changing financial landscape.”
Writer’s Thoughts
Modernising legacy systems is no longer optional for financial services - it is the strategic imperative that enables firms to meet client expectations, strengthen security, and drive growth. By embracing phased upgrades, cloud-native platforms, and automation, organisations can turn outdated infrastructure into a competitive advantage while delivering the personalised, real-time service today’s clients demand. Please comment below, interact with us on X at @fanews_online or email me your thoughts.
