The author of this article talks about the economic background of inflation and economic difficulties to argue that the "democratisation of data" is key to driving innovation in such a time.
Here is an article exploring the technology side of wealth management – a theme we explore through the month of February (although not just in this month, one should add). The article comes from Shai Popat, managing director, global head product and commercial strategy, at Switzerland-based SIX Group. The organisation operates the infrastructure for the Swiss financial centre. The editors are pleased to share these views; the usual editorial disclaimers apply to the views of outside contributors. Email email@example.com
We have all heard the much-used “generational shift” phrase. However, everyone seems to have different interpretations of what it actually means. As with so many phrases that regularly bestow our industry, the phrase means different things to different people.
The next generation of wealth management clients are more tech savvy than ever – with their mind-sets evolving, demands are increasing, expectations mounting, and behaviours fundamentally changing both professionally, and personally. But what exactly do these changes mean for the wider industry?
Sometimes, the personal and the professional are not as different as one might think. From Disney Plus and Amazon Prime, to Hulu and a plethora of other viewing platforms – the consumption of entertainment has changed beyond all recognition. It is now all about the having tailored programme recommendations.
The point is, this is ultimately where the industry is heading when it comes to data. Gone are the days of relying on one gargantuan pipe of information to wade through – people simply do not have the time or desire for this. What was once a Fort Knox fortress of insight that only certain individuals could access for reporting, is now a plethora of insight used to drive alpha.
Today, data is no longer for the privileged few, it is a right for many. But while, as in entertainment, the consumption and use of data is changing, in addition to who is using it, the objectives remain the same. The front office just wants the most insightful data that helps them generate returns, while the back-office expects the data to be correct and integrated into their systems.
Take the latest interest rate rise by the Bank of England to 4 per cent in an attempt to try and slow inflation. The challenge is that with inflation still hovering around 10 per cent, financial institutions are trying to sift through a high velocity of data to find the golden nuggets of information to act on in order to deliver alpha. The good news is that financial institutions see growth potential from the enhanced value they can derive from data and analytics to generate alpha.
Nearly a quarter (24 per cent) of respondents to our future of finance survey of C-level executives across 300 financial institutions said that data and analytics is an investment priority. You could call it looking back at what the data showed on the impact of past inflationary periods on markets in order to have a better grasp on what might happen in the future. Certain events are, of course, harder to assess from an historical data perspective than others.
After all, global monetary tightening is something that has been alien to us for decades, until now. This is where the underlying data has a vital role to play. But underlying data is nothing if you cannot connect it to your securities of interest, your portfolio or your assets under management. To reduce any potential risks associated with adopting any new data sets, a financial institution must be grounded in historical trend-based analysis as well. The painful pincer movement of high inflation and declining global growth means that now is not the time for financial institutions to wait for answers tomorrow. Shareholders and customers are seeking out fresh thinking to drive opportunities for growth, while also relying on stability, clarity, and certainty to navigate themselves through the challenges of today.
Therefore, to navigate throughout these times of change, the democratisation of data is key to ensuring continuous innovation and delivery to truly transform today’s financial system. Regardless of whether it is core reference, pricing, or other sources of data – financial institutions need provenance and purity of data and the security of the decisions made to cover reputational risk, fines, and those all-important key risk indicators.