06/08/2020 Feature Articles 6 minutes to read Back to all News & Insights
Author Adam Pointon
Adam is Praemium's Chief Technology Officer.
The value of data for financial practices is increasing. We look at steps advisers can take to leverage data for client engagement and business insights and the future trends for data in financial services.

Just as Amazon, Netflix and Spotify harness data to curate new recommendations based on your previous history, advisers can also leverage the wealth of data already available to them today, to help pre-empt client needs and provide valuable business insights.

In an industry that is under the constant pressure of regulatory change, robo-competitors and compressed fees from low-cost investment solutions, data could be the key to future success for advice firms by unlocking new client opportunities, increasing assets under advice and ultimately providing better outcomes for investors. 

And as more advisers move to a digital advice model, data will play a critical role in driving this digital transformation.

How data is evolving financial services

Across the globe, artificial intelligence and machine learning are rapidly changing how companies respond to customers and that has never been more prevalent than in the financial services industry. Given the volume of data-driven decisions generated, it’s probably no surprise that the finance sector is leading innovations in artificial intelligence. From the largest banks and insurance firms to fintech start-ups, data is driving significant changes in security, customer service and risk management.

Transactional data is great for machines to help identify patterns in what is normal and abnormal. The volume of data available allows institutions to predict upcoming payments, alerting customers if a payment was expected and missed, detecting fraud or transactional errors, assessing credit-worthiness or identifying an unusually large inflow that triggers a sales call from the customer’s bank.

Customer service platforms are increasingly adding machine-learning capability to process support tickets, build customer profiles for tailored support or cross-sell opportunities and further automating knowledge bases to power new tools like chat-bots or support assistants.

Open Banking has already enabled a significant shift in terms of what the power of data can deliver financial services, creating the possibility for multiple automatic and reliable sources of wealth information and we are only in the infancy of this journey.

Data is an untapped resource that has been equated to untapped oil – if you can mine and refine it successfully, it will reap rewards. You don’t have to be a large corporate to benefit, the value of data is real and smaller advice firms can also benefit.

Data and financial planning

The technology already exists to filter and analyse data to help advisers grow assets, better retain their client base and attract new clients.

Financial planning CRMs capture data that helps generate personalised risk profiles for clients and create client segments based on demographics and psychographic information. These detailed client profiles can help firms engage and attract new clients by targeting granular subsectors that match these specific groups, which are then naturally well received.

Artificial intelligence and machine learning are giving greater insights into client sentiment around their wealth management. For example, Praemium’s Insights functionality can alert advisers to clients that may be in need of additional advice or engagement, allowing them to prioritise clients that may need their focus now.

Data analysis can help identify risks and issues before they become a problem and highlight processes that need to be tightened or aren’t being followed properly. For example, evidence of fee-for no-service or situations where the same investment strategy has been applied to clients with different risk profiles.

Getting started

Creating a process for gathering, managing, storing and protecting data will be an increasing focus for advisers. Capturing data may already be part of your continuous-improvement thinking or program, but a realistic starting point is understanding the data you have in your business and creating processes to ensure it is up to date and complete where possible, whilst ensuring you meet your legal obligations in line with the relevant privacy laws.  

You don’t need a machine learning or artificial intelligence strategy, as much as a data strategy. So ask yourself the following:

  • What problems do I want to solve, and could data help me understand those problems better?
  • Of the digital processes I have, especially client touch-points, what data am I capturing?
  • Even if you’re not using it now, should I capture data in these processes?
  • For example, how long does it take me to do X process with a particular client? Why did client Y change their mind and what was different? What experience did client Z have and how can I improve it?
  • Do we have a system that tracks emails to investors or digitally signed documents or requests, and if they open them?
  • How many times did client X open it versus client Y? If client Z opened it 27 times, did we call them to see how things were going? Perhaps I’ve missed the mark with my service or proposal or perhaps I should simplify things for that client segment? What was different about those two clients or the planning/advice that I provided?

Remember to use your data. The data your business generates can be a great source of new ideas, and importantly it should be used to remove existing bias or help validate ideas and concepts. A data-driven organisation will have a more solid foundation from which to move forward.

Where to next?

So what does the future look like for advisers in this data-driven world?

Data creation is accelerating, as is the understanding of the value of data. As a result, data security and privacy protection will become increasingly important, not only from a legislative perspective but also for the value data provides to the business.

With a deeper understanding of the client, advisers will be able to deliver more personalised experiences, better-tailored products and services and bespoke communications efficiently.

Increased automation will lead to even less friction in digital-based financial services. Identity, authentication and authorisation will be mostly automated with improved trust and risk scoring that will further speed up transactions.

Conversational AI as a digital assistant for sending documents or booking meetings will create further administration efficiencies. Though this functionality has existed for some time it, will become mature, normal and eventually relied upon.

In the future, client engagements and interactions will improve with technology that helps identify emotions and facial expressions during meetings, allowing advisers to assess a client’s response to a portfolio review or investment recommendation and make real-time adjustments to the conversation.

Creation and delivery of client content will also change. It will be possible to create natural-language generated on-demand reports or investor briefing videos, using investor, adviser and investment manager information. How about a life-like automatically generated video content of the adviser, perhaps reading out a client’s quarterly statement complete with their mannerisms and investor-personalised humour, along with opportunities to interact and engage as an investor?

We’ve really only just begun.

 

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