In today’s wealth management sector, data is being leveraged to drive business value, improve efficiency, and boost revenue. However, the adoption of data-driven practices remains inconsistent, with quality issues impacting company performance.
This article explores the current use of data in wealth management, the potential improvements if data is utilised effectively, and the challenges faced in doing so. It also explains how we empower firms to maximise the benefits of data, establish a strong data foundation, and unlock true business value in the digital era.
The Role of Data in Wealth Management
Ultimately, most wealth managers are looking to leverage data to achieve one thing; to increase the value of their business. This is no doubt a crude perspective, but in the final analysis wealth managers are capitalist ventures funded by investors – whether private or public – looking to make a return on their investment.
Whether it is using data to drive product recommendations, identify at risk customers, or automate AML or KYC processes, the ‘lower level’ initiatives commonly found within technologically aspirational wealth managers are generally steps towards that overarching business value goal, which can be supported in one of two ways:
The more interesting questions, and the primary focus for this article, is how are successful wealth management firms currently using data to support (1) and (2) if there are shortcomings, what can be done to address those shortcomings?
The status quo
The current success of wealth managers in effectively using data to support improvements in business efficiency and revenue can be summed up in a single word; inconsistent.
In any industry, the successful use of data is derived from how well a firm’s data measures against three fundamentals:
Whilst there is no doubt some firms are scoring very highly on all these factors; few would claim this to be commonplace. A survey by AI Data & Analytics Network, assessed the quality of firms’ data, 77% listed quality issues and 91% stated that it’s impacting their company’s performance. 67% of CEOs indicate they often prefer to make decisions based on their own intuition and experience over insights generated through data analytics because they lack trust in the data.
The financial industry, particularly wealth management, has been relatively slow in adopting data-driven practices. According to McKinsey, advisors spend almost 60% – 70% of their time on non-advisory activities due to lack of automation. Wealth management firms need to invest in technology which can automate, streamline and, crucially, support a strong scoring against the three data fundamentals. Through, by way of example, solutions for systematically controlled data input, automated validation and coherency checks or elimination of rekeying.
The hard truth
It is interesting to compare the above observations on the relative data immaturity of wealth management with another observation; the growing use of data-driven insights and analytics in the financial services industry:
Whether it is in response to a pervasive media narrative on the power of ‘Big Data’ and ‘AI’, or the threat to incumbents of a new wave of FinTech enabled innovators, one might reasonably ask if there is a risk that the industry is scrambling to reach the end game before putting the data foundations in place.
Where data quality and consistency are not there, the use of advanced analytics and insights can in fact do more harm than good, with the potential to produce false or misleading insights on which critical business decisions are made with a false sense of confidence. In this sense, advanced analytics are potentially a ‘double-edged sword their transformation potential is real, but so is the risk to the business. In short, firms need a data strategy as well as a business strategy.
Steps to take
It is important to re-emphasise the variation across the industry and that there are firms getting it right; putting the technology in place to support the sort of data maturity that enables advanced insights and analytics tools to provide a very real competitive advantage in the common drive to continually improve efficiency and increase revenues. For firms that are perhaps a little further behind on their journey, there are many positive actions that can be taken, including:
Higher priority: short to medium term
Lower priority: longer term
Getting the foundations right
The importance of a firm getting its data foundation right before attempting to introduce ambitious intelligence layers on top of that data cannot be overstated. To do otherwise is, unfortunately, an all-too-common mistake for firms feeling the pressure to do ‘something’ in response to the noise on ‘Big Data and AI’. It is to build an edifice on sand.
When introducing new technology solutions with the intention to reap the full benefit from the data held within their databases, firms must be conscious of three things:
Wealth Dynamix supports all these pointers, with data migration (1) being a key focus point within solution implementation and with (2) and (3) being concepts not only reflected into the bedrock of the products but also carefully considered in the introduction of a new feature or the evolution of an existing one.
To highlight some key capabilities in this area:
Delivering true value
By supporting firms in establishing a foundation of rich, consistent, and accurate data, Wealth Dynamix’s solutions put firms in a position where they can be confident that the layering of data-driven intelligence will deliver genuine business insight and business value.
To highlight some key capabilities in this area:
Built for the long-term
The possibilities of what can be done with good data are growing at an alarming rate, as are the practical applications of that theoretical possibility by leading firms within the financial services industry.
Our solutions are not just beneficial to the front-line advisors but to everyone within the firm (e.g. middle office, back office, management, compliance). With all teams and roles on a single platform and sharing the same data set, collaborations become seamless and processes more efficient.
Are you seeking to create an extraordinary digital-first client prospecting, onboarding, and servicing experience for your wealth management firm?
If you would like to learn about how we can assist, please don’t hesitate to get in touch.
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