Here is a guest article by Bob Leaper, head of business development, North America, DST Global Solutions, emphasizing the importance of data quality in the wealth management.

Here is a guest article by Bob Leaper, head of business development, North America, DST Global Solutions, emphasizing the importance of data quality in the wealth management.

Wealth management firms are rethinking their business models as they strive to better service their clients. This has resulted in an increased interest in client reporting tools that offer improved transparency and client satisfaction. While investing in enhanced delivery mechanisms and services will provide clients access to updates on their investment performance in a more timely fashion, it is really the data within the report that is the critical concern. If the data is incomplete or inaccurate, the insight the data delivers will not be of high value.  

Put simply, reporting and data are inextricably linked.  In addressing how to better service clients, wealth management firms need to take a strategic view of their infrastructure and tackle the underpinnings of how they manage, collect and aggregate data before visualization and delivery. A tightly-integrated data management and visualization strategy should play hand in hand.

Aggregation and held away accounts

Wealth managers and their advisory arms are being asked in greater frequency to provide advice across all of their clients’ investments, including those in “held away” accounts (“held away” refers to accounts not actively managed by an advisor or custodian affiliated with the advisor's financial institution).   

Offering advice and reporting on these investments requires aggregating disparate data sets from different sources to provide a complete view of the clients’ overall exposure and return.  In fact, a recent report that DST released in conjunction with Aite Group found that 67 per cent of wealth managers are experiencing challenges with aggregating data and that 90 per cent have witnessed a significant uptick in data aggregation requirements.

Sophisticated analytics

Today’s mass affluent and high net worth client is far more sophisticated than previous generations and now demand the granular analytics traditionally reserved for institutional investors. They require access to investment performance and valuations to understand the drivers of their returns.  

Wealth managers and their advisory channels need to be able to service the new requirements of this new generation of investor. This starts with accurate data and tightly managing the "GIGO" or "Garbage In, Garbage Out" scenario.  Valuations, transactions and other data need to be correct in order to produce accurate performance returns and risk statistics.

A rising investment in complicated instruments like mortgage-backed securities, fund of funds, over-counter derivatives and other alternative investments has made managing this process increasingly challenging. The ability to look through to the exposure of these types of securities, understand risk and communicate data to clients will be a true competitive differentiator for wealth management firms looking to better accommodate client demands for transparency.

Flexible and faster

We see some wealth management operations teams spending 25 – 30 per cent on data extraction and collation in order to run performance calculations and generate client-ready reports on the back of this data.

The immense amount of time spent on reconciliation and administration is at the expense of growing assets under management.  There is a great need for operations teams to become more nimble – to make updates on the fly across lots of accounts, to slice, dice and aggregate data in different ways and to provide granular analytics – for transparency demands to be achieved.  

Conclusion

Exploring better client service delivery models like client reporting requires sufficient investigation into data and data management structures. Expectations for information delivery are only going to increase as investors continue to become more informed.  Wealth management firms need to stay ahead of the curve, leveraging data management technology and practices that provide accuracy and efficiency to enhance client relations.