The promise of big data for wealth management has not diminished

In today’s digital world, more and more emphasis is being placed on data management and strategy to ensure that organisations are unlocking the greatest value from their data. It is no different in the wealth management industry, where investment advisers and portfolio managers are continually looking for new insights and actionable information that can be gathered from data in order to remain competitive and stay ahead in the market.

However, the “data deluge” investment professionals are faced with today creates a major challenge. While they thrive on data and access to data, they are often overwhelmed by the flow of facts and statistics. Information can be streamed today through a number of channels, with mobile apps, dashboard interfaces and other credible sources available to investment professionals. And yet it remains difficult for them to navigate the noise to get to what they need.

Many years ago there was a magical invention – the newspaper. Hard to believe now, but this one source would provide all the financial news any investment advisor needed and could be expected to know. This critical information would arrive on the doorstep each morning and make sense of what happened on a given day. Newspapers provided that common frame of reference for the financial world, and the ability to correctly interpret information within its pages separated the winners from the losers.

Digitisation has turned the old way of collecting information on its head and presents a dramatically different world for advisers. Reading from a newspaper is no longer sufficient and there are many other sources of specialised financial information found online. Consumers today expect news and information wherever they are and whenever they require it. It is accessed on demand at the speed of people’s lives. The internet is today’s newspaper and serves as portal for information anyone needs in the global economy.

The flow of data to wealth and investment services professionals is infinite and ever growing. The clicks-for-cash mentality has seeped into the financial services technology sector as well. Data streams that are sold as essential and marketed as critical are often times useless and irrelevant. However, serious investment professionals understand that it is the quality of information that is vital, not the quantity. What is more, dramatically increased fiduciary duties also require firms to keep pace with a growing number of regulatory and compliance-related developments. It is no wonder that information overload and the consumption of data without the proper context or understanding of how to interpret it can lead to data paralysis.

Still, the promise of big data for wealth managers and technology providers has not diminished despite the setbacks. The ongoing issue of “data access” for investment professionals is a huge one, and something that will be addressed by the next wave of unified wealth models. This will mean having the ability to deliver information to advisers in a preferred and customised way to help them to meet investor demand. Data is a strategic asset. If faulty data impacts the advice offered by a firm and its professionals, then the quality of that advice is compromised. If managers and advisers become distracted by unfiltered noise, clients may ultimately suffer the consequences.

While data paralysis is nothing new, it is increasing throughout the industry. Ten years ago, I worked for a startup that was buzzing with excitement about its ability to produce actionable information upon collection. One of the clients we worked with opted for the collection-only functionality to be input into a vast data warehouse. We collected terabytes of data and over a year later, the client converted to our information system. They had spent a vast amount of money on storing the data. However, we did not have a plan on how to evaluate the information and select what was relevant to the client’s strategy.

Over the years since that time, and contemplating similar situations today, I have reached one overarching conclusion: news is information backed by knowledge; noise is data without context. What we must learn is that data on its own is never “actionable.” It requires knowledge to understand the information that is relevant to allow investment professionals to add value and make better business decisions, both for themselves and their clients. If investment professionals are equipped with the right insight, they are able to deliver better service to their clients and ultimately build brand loyalty.

Sam Bellamy is vice president and CIO, Investment Services at Fiserv, a provider of technology solutions to the financial world