The Problems with Legacy Platforms in Financial Services IT

30 years ago, the financial services industry looked quite different. Technology was different. Services offered were different. The consumer’s expectation was entirely different.

The finance industry was among the first to adopt client management and productivity tools like CRM and others. Today, these platforms are often seen as legacy, and legacy platforms have increasingly entered into the discussion around digital transformation.

Although popular to discuss, the terms also bring with them a lot of ambiguity and assumed conclusions. Today, we’re going to explore legacy platforms and why they’re so ingrained in some businesses and what that means for the financial services industry more specifically.

I’m joined today by Rod and Colton De Vos from Resolute Technology Solutions and I’d like to give you a second to introduce yourselves as well before we go any further.

Rod De Vos:
Hi there. Rod De Vos here, I’m the President of Resolute Technology Solutions. I have worked in IT in the financial services and insurance sectors for the past 30 years.

Colton De Vos:

And I’m Colton De Vos. I’m in charge of marketing and communications here.

The Legacy Landscape of Financial Services IT

Thanks for that. So I want to really jump right into it and give us an introduction into legacy platforms. There’s certainly a lot of ambiguity, but at the same time, a lot of talk about legacy platforms especially in the financial services industry.

What is a Legacy System in Financial Services IT?

Before we go too far into it, what exactly does a legacy platform mean?

Rod De Vos:
Well typically, they’re platforms that are written years ago in order to support the business at that time and they’re using, of course, whatever technologies were available at that time.

They don’t have to be 15 years old or 30 years old. They can be 10 years old and still be considered legacy. It’s usually a core system that actually was built to run your financial services company and it can be end-to-end for the business or it can be just a core section of the business.


So in the insurance world, it was with. the policy and admin and billing system and the claims system

Wealth Management

In wealth management, it was essentially the investment management system that potentially included modules and pieces for trading, settlement, portfolio management,  and reporting.


And then, of course, in the banking industry it was core banking systems.

Typically, when people talk legacy, they’re referring to sort of older mainframe-based systems written in COBOL or other third or fourth generation languages.

Although in today’s world, legacy can be – as I mentioned – 18 years old; in which case it might not even be mainframe-based. They could be early cloud at this point even to be 18 years old.

How Legacy Systems Work in the Financial Services IT Space

Financial Legacy Platforms and Systems

Now, what did some of these early functionalities consist of? You mentioned that they were often a core system that was built around enabling some core functionalities of your business.

It could be 30 years old or it could be 10 years old. What are some of those core functions?

Rod De Vos:
Well typically, if you look at the world of a financial planner, they would have walked around with a briefcase and paperwork and they sat down with the client to fill-out a form in order to open up a new account, and then they bring that back to their branch or head office.

They hand the paperwork in and the system was written really to do data input. For inputting information screens had to key in that data manually. You’d open an account, you’d set up a client, etc and then you do a transaction and then the batch would run.

So once that data is in, the overnight batch would run and the mainframe would kick off. That would be processed. After this, you finally had, essentially, some value in your accounts from that perspective. And then you’d use that system to maintain those accounts along the way.

There would be third-party inputs or integrations as well, but they were hardwired and custom written to different businesses, banks or to the markets.

They didn’t have what I would call object-based screens. They were basically command line driven character-based ways of navigation: so there’s no dropdown, there’s no point and click, mice didn’t exist in those days.

All those kinds of things that were…they were basically the green screens that you’d see from the film The Matrix. And everything is custom coded. You wrote that thing from scratch. Some were were built on top of packages, but majority of them were custom written.

Now it’s interesting that you were saying in many cases these legacy platforms were very mainframe-based, i.e. no drop downs or no object-based screens.

It’s obvious to many that such a system would be a traditional legacy platform, such as a blue- screen, like a DOS based system. They know that it’s a legacy platform, but as you were saying, a legacy platform is also something that was just there on the bleeding edge of today’s legacy platform development.

These actually included cloud-based functionality or did have control through a mouse and object-based screens, but they themselves are also considered legacy by today’s standards.

Rod De Vos:
Yes. Consider early options such as client-server where they’d write a portion of the application that would run on the actual PC and the back-end portion of the application that would run on the server. Thus you’d have code in both locations.

Every time you’d upgrade your PC you’d have to reinstall the application. That is considered to be, today, legacy. And it has nothing to do with mainframe.

Learn more:

The Challenges of Maintaining a Legacy IT System

So let’s dive into it then.

What exactly is the problem with these legacy platforms?

It’s certainly coming up today in the discussion around the digital transformation, so let’s dive into some of the problems.

Rod De Vos:
The problems would be the language. The technologies are just so different. The languages are borderline obsolete, no longer supported, they don’t scale well. If you want to open up different locations, they don’t necessarily transition themselves to be a distributed environment. That’s a technical problem.

The other problem is they’ve not been able to necessarily keep up with the functionality that the modern customer has come to expect. Things like drop downs, filling-out forms, AI and other things that run in the background – make automation much more efficient.

For example, built-in rules-based workflows that describe essentially how you use an application in real-time instead of waiting for a batch to run. The customer experience itself now involves those real-time interactions, which are key for putting data into the system through notes, bots and questions you can ask.

Inability to Mine Data

In the old systems, they often had these flat files and there wasn’t any ability to really store notes about the data you’re entering. They would key that in in free-form or free text. So it’s not stored properly in data fields, in which case there’s no ability to mine the data, search for the data, run a specific set of business rules against it, etc.

Inability to Integrate New Features

There’s limited file space for that kind of thing, so the data base themselves had limitations in terms of file sizes. This includes no graphical user interface. Like I mentioned, it was command line or code driven and basically difficult to enable mobile. None of that would work on a mobile platform as it is today. No automation, no integrations with newer technologies like GPS and things like that, and certainly no concept of cloud as we know it today.

Thanks for sharing. Colton, do you have any insights on research or commentary in the marketplace about the drive towards transforming some of these systems?

Colton De Vos:
You bet. Gartner’s put out quite a few different reports on this subject matter.

From their CIO reports, it’s come out that it’s a top priority among insurance and other financial industry, “CIOs need to upgrade their systems before they can actually digitally transform and take advantage of some of those new functionalities”.

Now the financial services industry is a master-sector encompassing a number of different sub-sectors. Exactly how pervasive is the issue of legacy platforms and perhaps who is most impacted by legacy platforms as they are today? Are some areas more impacted than others?

Rod De Vos:
Yes, I think if you’ve been around in the business for a long time, especially as changes and regulations evolve, you have to change these core systems.

It’s difficult to always find  the right skill-set. So if you’ve written your system in 3GL, they don’t train people in that anymore in today’s university computer science program. You’re no longer trained in those environments. You’re trained in the current programming languages. Therefore, it’s difficult from a resourcing perspective to maintain legacy systems.

It’s difficult to make those changes, so there are lots of different ways of tackling those problems. But firms that have been around for 20 years, built their business and built their system under it. So any new financial services firm starting out obviously is not going to have that kind of legacy system as a challenge.

And I guess with that you’re saying that it’s across all of finance, whether it’s insurance, wealth management, or banking. Really what it comes down to is:

  1. How large the organization is and;
  2. How rooted are their operations in the function of the system itself.

Rod De Vos:
Yes, it’s certainly across  all those three subcategories of financial services. Typically, they’ve been able to change their processes sometimes without changing their system. But if their process is tied to the way the system works and the system is difficult to change, that makes them basically less effective in the market. So many of them are impacted or hampered by legacy.

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The Challenge of Replacing Legacy Financial Services IT Systems

Financial Legacy Systems

So noting that these challenges, if you’re unable to enable the digital transformation because you’re on a legacy system and you’re unable to find the necessary skill sets to manage the old system because it’s on an older programming language, among other things.

Why would these systems still be used today and why would businesses still chose to have them in place?

Cost and Risk are the Main Constraints

Rod De Vos:
I think it’s because it’s monumental to replace them, both from a time and effort perspective as well as from a cost perspective. They may not be broken, e.g. they don’t suffer regular outages or they could be stable. It’s just a matter of whether they’re truly as productive in meeting the modern day business requirements as they once were.

So essentially what we’re facing here is businesses that have these massive legacy systems in place can’t go about changing them because the cost is absolutely out of scope.

The system itself might be so customized that the operation of the business is locked in with the operation of the platform and there are no off-the-shelf packages that they could actually purchase just to replace the system.

There’s certainly a lot of time requirements involved that they may not actually have the resources both even in-house or even if they were to outsource at a dollar-for-dollar level.

Not to mention that there’s a massive risk introduced to the business as a result of changing even one of these systems. If it’s done wrong, it could cripple the business and it could cripple the business to a level that they may not be able to recover.

Get Your Financial IT System Checked for Critical Vulnerabilities.

Legacy IT Systems ‘Just Work’

Rod De Vos:
There’s all those things that are certainly huge challenges for a company to overcome. But over the years they’ve been able to either write old add-on functionality to integrations and interfaces in order to avoid that big technical rewrite by adding new functionality on the customer side.

This includes better user interfaces, workflows that are maybe third-party, change in processes, etc, that allow them to augment the lack of functionality that’s in that legacy system.

They end up using it for core processing only and just change the way they work on the front-end and even get productivity improvements without actually changing that core system itself.

The other thing that’s been common in the a href=”https:/”>financial services industry></a is they’d start their path in terms of getting-off legacy and they’d do a merger and an acquisition where they buy another company and they get a second legacy system.

Now one thing that was really interesting, you had mentioned that some legacy systems are so customized that there is no actual solution that they could find in order to meet their needs.

Do you have an example of that?

Learn more:

Using a Highly Customized IT System

Rod De Vos:
A good example would be if you have a niche business offer where you can go start to finish.

There are a lot of partners in financial services where you can have independent financial planners, or you can have a broker selling your insurance or your product that could be independent or captive.

Or you go end-to-end with your own sales force. If you go end to end, there’s a certain level of efficiencies that you can achieve, not just because you don’t have to hand off between different business and different systems. So in that regard, legacy-wise, people wrote a system for that niche business need.

The industry has evolved through third-parties, channels and brokers, etc. If you’re still one of those with proprietary in-house sales systems, then there isn’t one complete package that has everything for you because the market’s evolved differently.

You may have margins that are way higher because of your efficiencies than other industries that have to share that process with brokerage or agents that are third-party.

However, it requires a unique system or a unique level of tying mini-systems together in a highly integrated way. Therefore, is there an exact replacement for that one system that you had because you’ve taken a unique approach to having everything in house? No.

There isn’t that system, i.e. that one system that’s a slam-dunk replacement. Therefore, they keep maintaining their legacy and enhancing it as they go.

Colton De Vos:
And in terms of a href=”https:/”>financial services>, that could be a highly customized investment product or it could be an insurance plan that’s so custom that it takes that customized system to be able to deliver it.

Rod De Vos:
So we had a unique product that was a 20-year investment product that had a maturity tied to the end of it and you had to keep calculating tax and maturity and valuation and interest against it on a long term product. And all your business rules are specific to being in the system. It’s a 20-year run for that system, just to support that one product without rewriting it.

Well, that’s incredible. So certainly there’s a lot to keep in mind if you’re ever trying to go down the path of digital transformation within the financial services industry. I do appreciate your time today.


Colton De Vos:

Rod De Vos:
Thank you.




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