Harnessing the predictive power of data in wealth management

Annual client insight programmes can turn private banks into Jedis of wealth, harnessing knowledge to capture points of customer apathy and banish dissatisfaction into darkness.

But to become a Yoda of wealth requires a deeper voyage into the galaxy of customer insight. Real-time analysis on client data not only enables firms to respond more quickly to changes in sentiment, but also to develop a predictive power.

The e-commerce industry is one area where the Force is strong in this regard. Netflix, the online entertainment hub, has built such advanced data analytics that it can anticipate what its customers will do next. The secret to its success is assessing and combining multiple streams of real-time insight. What viewers watch or search for, the times of day they do so and the triggers that make them fast-forward or rewind are all areas of analysis.

Instead of just using audience data merely to identify what customers have liked in the past, Netflix leverages it to predict what they will like in the future. Real-time insight allows it to react quickly and create new content accordingly. The series “House of Cards” is a notable example of this – bought by Netflix because its analysis suggested it would be successful, the show is hugely popular across the world.

Imagine if wealth managers could also master the techniques employed by companies such as Netflix, leveraging detailed, real-time client insight to anticipate their future product or service requirements.

Some wealth management firms have already started to move in this direction. A recent case study of one of our clients – Firm A – provides an example of how ‘the power of data’ can be translated into a more proactive business strategy.

Firm A monitored client sentiment on an annual basis. Figure 1 shows the yearly results of this client sentiment tracking. It highlights a sharp drop in customer satisfaction in Year 2 and a sharp improvement the following year. While such analysis is a valuable warning flag, it does not help to pinpoint where or why this change in sentiment could have occurred.  

However, Firm A also decided to undertake shorter pulse surveys alongside its more detailed annual programme. Quarterly analysis shows that the significant drop in customer satisfaction first appeared in Quarter 2 of Year 2. Understanding this dramatic change in client sentiment enabled the institution to quickly analyse the causes for the drop and reorient its strategy accordingly. Measures were taken to tackle the problem and, as a result, performance continued on its more positive trajectory.

The case study demonstrates that listening to your customers often, if not yet on a real-time basis, pays off. Using data analytics to track customer sentiment enables firms to tackle challenges more quickly; more frequent data is the key for wealth managers to move from reactive to proactive. Firms that master the ‘power of data’ are even able to take it a step further to anticipate the needs of their clients.   

Netflix realises that this strategy is paramount to the success of its business, because when viewers are satisfied and keep watching movies they will remain customers. As Netflix CEO Reed Hastings says: "Once you subscribe, our interest is purely your happiness."

Adopting the Netflix strategy and listening to customers frequently could be the secret to ensuring their happiness… and could also give you the innate wisdom to become a Yoda of wealth.

Denisa Pritzova is an analyst at wealth management think-tank Scorpio Partnership