Forget big data – here’s how one adviser uses small data

As a counterpoint to the flurry of articles about “big data,” many industry pundits are addressing the value of “small data.” In my world, small data refers to the information I can access and interpret from my own resources within my RIA firm. Four tools make this possible for me: A CRM system (Junxure), portfolio accounting software (PortfolioCenter), re-balancing software (TRX) and tax preparation software (Lacerte).
These tools, if used properly, produce benefits in the following ways:
• Client interests (CRM): Which clients would enjoy baseball tickets, who would likely attend a seminar on aging parents, etc.
• Practice management (CRM, re-balancing): Who takes the most amount of time, which clients require numerous transactions, who is spending too much or too little, etc.
• Marketing/client services (CRM, portfolio accounting): Who our largest clients are, who refers to us, what the demographics of our client base are, what the demographics of our best clients are, what our clients’ interests are, etc.
• Tax-efficient portfolio management (re-balancing, CRM, tax software): Which clients can benefit from tax gain harvesting (zero capital gain rate), who might qualify for Roth conversion, who is subject to required minimum distributions, etc.
(See also: Big data: New technology comes to compliance)
Armed with this information, we can make better decisions. For example, we can plan a client appreciation event that we know our clients will enjoy. Our clients are not into golf, so planning a golf outing would not be a good idea. On the other hand, they like the water (San Diego is known for that); thus, we are sponsoring a harbor cruise this year — and expect big attendance.
This data also helps us to analyze where we can improve, whether in terms of clients service, honing our client base, targeting certain clients to approach for referrals or identifying which clients would be interested in a particular e-mail update. We have used this approach to recommend alternatives to using our firm to clients that were not a good fit — based on assets under management, staff interactions or amount of work relative to fees.
When the Defense of Marriage Act was repealed, we were able to send a timely e-mail explaining the repercussions to specific clients affected. And, perhaps most important, we are able to be proactive on behalf of clients. Examples include suggesting Roth individual retirement account conversions, year-end tax planning and RMD planning.
By making the most of information at our fingertips, we can more effectively build our firms, provide better clients service and make our lives easier.
Sheryl Rowling is chief executive of Total Rebalance Expert and principal at Rowling & Associates. She considers herself a non-techie user of technology.