The most successful wealth management firms today continually maximize the value they provide for clients. In many ways, they've embraced forward-thinking technology and business models — think robo-advisers, outsourced investment management and concierge services — to give their advisers more time to spend with clients and grow the business.
However, even among the most tech-savvy advisers, common misconceptions about reporting data continue to prevent firms and advisers from taking advantage of opportunities to find more efficiencies that can spur growth, especially in a market where investors are increasingly demanding more of their advisers.
Some of the most pervasive data myths advisers need to bust:
My data are limited to the assets I manage. Account aggregation is integral to providing holistic financial planning. However, many advisers think that they can only see the assets they service directly. Now more than ever, advisers have access to data pulled from enterprise broker-dealer feeds, representing assets from custodians and record keepers covering accounts related to brokerage, mutual fund, insurance products and alternative investments. Through integration with single account aggregators, advisers can access tools that harvest supplemental assets and liabilities such as bank accounts, credit cards and 401(k)s.
Data are inconsistent and cannot be trusted. Many advisers spend an undue amount of time reconciling data. "Garbage in, garbage out" is a common phrase among those who work with data to describe how bad data sources lead to bad conclusions. But there are ways data aggregators can work with data providers to identify the gaps so they can produce a more reliable data set.
We have formed a data quality forum that helps measure quality across four dimensions: accuracy, completeness, timeliness and coverage. Broker-dealers, registered investment advisory firms, custodians, record keepers, product companies and aggregators can meet regularly via this forum to identify gaps in data and address challenges.
Consolidating data for reporting is standardized. Account aggregation capabilities vary greatly depending on where data are gathered and why data are being consolidated. Not every data aggregator collects data at the same frequency or at the same depth. Most aggregators can normalize the account descriptive data, such as balances and positions, but face challenges when normalizing transaction-level data across multicustodial accounts for consolidated performance reporting purposes.
It is critical for advisers to work with an aggregator who can provide enterprise-level data aggregation and can ensure that the transaction data are "performance ready" in order to calculate a rate of return — at the asset, account and portfolio level — for any time period.
You can't take data with you. As advisers evaluate and reassess their business models, one of the questions they have is whether they can take historical client account and performance data with them, should they decide to move to an independent model or a different firm. The answer is that in most cases, they can — as long as they are not changing data providers and they have secured the consent of the prior broker-dealer or RIA.
Existing data integration with custodians and record keepers allows for the data interfaces to be disseminated to the new target firm for "go forward" transactional reporting, if these two conditions are met.
Data inconsistencies lead to an erosion of trust among clients, whereas high quality data can help advisers maximize business opportunities. Advisers need to understand the options available to them and ask the right questions if they are to leverage data to spur business growth.
Greg Borgman is director of data management at BNY Mellon's Albridge.