EXPERT VIEW: Wealth Management Firms Face Big Investment Data Management Challenges

Robert Leaper

3 October 2013

Here, Robert Leaper, head of business development at DST Global Solutions, outlines the challenges wealth management firms face in executing and achieving an integrated service model.

Within the wealth management industry, there has been increased interest in building out integrated service models to attract new clients and capture new streams of wealth from existing clients to accelerate and expand business growth.

It is clear that executing and achieving this business model presents significant challenges. We believe that two major blocking issues are: a fragmented technology infrastructure and immature investment data management practices.

Recently, DST Global Solutions and Aite Group teamed to uncover these challenges in a report titled Right Time, Right Content: Business Drivers for Smarter Investment Decision Making. Managing data for smart investment decision-making is a perennial challenge for wealth managers, as it tends to be siloed and used on disparate systems, the study found.

This is even more prevalent today with the growth in alternative investment strategies and resulting platforms needed to support those strategies. In fact, a recent study released by DST Global Solutions and Aite Group says that one fifth of asset and wealth management firms do not have a system in place to manage investment data and 29 per cent manage it on systems that are more than ten years old.

As internal and external demands for transparency continue to grow, wealth managers must be able to access a holistic view of their clients’ investment data across the investment life cycle to provide the level of transparency required by key stakeholders. This will require a shift in strategy, structure and practices in place for managing and leveraging investment data.

Data aggregation

As private banks roll out high-touch banking services to capture a greater share of wallet from high net worth clients and the mass affluent, the ability to bridge data sets from held away accounts and from pockets of existing legacy systems data aggregation becomes imperative for improved client service (in the form of reporting), improved client acquisition and retention. In fact, 90 per cent of firms that participated in the study identified data aggregation as a major challenge.

The majority of firms surveyed also reported that they believe that there is room to improve their support for data aggregation to enable a more cohesive operational infrastructure that supports business growth.

Internal business strategy

Many business heads are beginning to recognize the strategic importance of data management in an environment where decision-making relies on accurate and transparent data. Wealth managers must efficiently use data to support expansion into new markets and regions.

This requires technology that offers operational scale to cope with a higher volume of data complexity. In addition, they must also use data management strategies to link multiple outsourced providers and improve analytics and risk management for internal business users. Integrated data, removed from siloes, opens opportunities to diversify investment activity and improve operational efficiency.

Putting data to work

Many firms today have begun evaluating ways to attack their data management needs with the latest technology. In fact, the study shows that more than half of the firms studied are planning to invest in vendor technology to improve their management of investment data in the next year.

Properly managing investment data can provide a sustainable competitive advantage to wealth managers. By investing in this area, wealth management firms will finally be able to overcome key challenges associated with accessing, aggregating and distributing data for greater transparency and improved investment decision-making.