Broker-dealers debate big data and other technology promises

How successful are​ broker-dealers in harnessing the power of big data and predictive analytics to help advisers grow their practices and retain clients? According to a panel of broker-dealer executives participating in an InvestmentNews Technology Think Tank on Sept. 13 and 14, so far firms have only scratched the surface.

“We’re on the verge of being able to harness some of this information to be able to present something that would allow advisers to have different kinds of conversations with their clients,” said David Ballard, chief operating officer at Cetera.

At a micro level, some firms already are using the data they collect to alert reps to out-of-the-ordinary activity — such as unusual withdrawals — in their client accounts.

“We do that at Commonwealth,” said Kol Birke, senior vice president of technology strategy at the firm, “and also on a macro basis allow advisers on a veiled basis to see how all of their portfolios are doing compared to all other advisers at the firm.”

Advisers also can create static or dynamic groups of clients and compare those, he said.

One of the stumbling blocks to greater use of big data at broker-dealers is that until very recently, most of the data were fragmented or nonexistent.

“Ten years ago there was not widespread usage of integrated systems; now it’s all coming together,” said Marc Brasher, head of technology at HD Vest Financial Services, who said his firm, which specializes in serving accountants and advisers, is looking into using artificial intelligence to analyze client tax and portfolio data to check for warning signs and opportunities.

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Securities America Inc. is using artificial intelligence to help with workflow processes by recognizing repeated activities, said Doreen Griffith, the company’s chief information officer, who noted that the process is challenging because data from clearing and custodial platforms are “very mixed” in quality.

“And for the data to be truly meaningful for the client,” she added, “you have to get permission from them to access several outside accounts, as well as get them to provide information about their homes, coin collection or whatever else they own.”

Empathetic guides

In the minds of clients, the adviser of the not-too-distant future is likely to be an empathetic guide who not only knows everything about them and remembers every conversation, but also creates and manages the client’s custom portfolio. On top of that, the adviser will be able to report whether clients are on track to meet their goals — or if they’re off-track, by how much — at any time via any medium.

That picture, painted by Mr. Birke, will be driven by technology that’s already on its way.

“These are things that clients always have wanted, even if they’ve become comfortable with what advisers could give them without technology,” he said. “We’re on our way to delivering that.”

The key to delivering what clients actually want, however, is being able to really listen to them, said Lon Dolber, CEO, CIO and president of American Portfolios Financial Services Inc.

“It’s not that advisers won’t tell us the truth or that I want to circumvent them, but advisers have their own perception of what clients want, and I need to hear what the investing public wants directly,” he said.

That process includes a commitment to involving women — a key client segment whose concerns are often overlooked, said Ms. Griffith of Securities America.

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“The boomer generation of women are going to be left with a lot of money, and not enough attention is being paid to them,” she said. “With all the talk about boomers’ children inheriting their parents’ wealth, what you don’t see written about is that the money goes to the widow first, and we need to reflect thoughtfully on how to serve them.”

The differences should be acknowledged, she said. For one, women learn differently than men and differently than their adult children, and therefore the tools they want are different.

“Women want more pictures and graphics than written reports,” Ms. Griffith said.”We have to be able to deliver what women want, because more of them will be our clients.”

Fiduciary rule prep

Preparing to implement the Labor Department’s fiduciary rule for qualified accounts required feverish work that sidelined other important projects, but broker-dealers were ready to implement the requirement as of the expected June effective date.

Participants in the Technology Think Tank broker-dealer roundtable said their firms will have more work to do depending on how and when final rules are implemented, but that many firms used the new rule as a springboard for other technology changes.

“We looked at the change as a transformative opportunity to become more transparent and more upfront in the information we deliver to our advisers and clients,” said Mr. Ballard of Cetera.

For instance, his firm is working to provide advisers with ways to charge clients for services rather than transactions.

Oddly enough, evidence of a commitment to preparing for the new rule was a recurrent theme among advisers involved in the recruitment process, Ms. Griffith said.

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“I never thought that in a home office visit by potential recruits I’d be asked about what the firm had done in regard to DOL, but it was very important to many advisers,” she said. “They wanted to make sure that if they made a move, the firm they chose to go to had been proactive in making compliance with the rule a focus.”

But a fiduciary operating environment, which implies planning and documentation of best-interest efforts, requires a technology infrastructure to support those efforts and provide the scale required to keep the enterprise viable.

“We’re getting compressed,” said Mr. Dolber of American Portfolios Financial Services. “At some point, I believe we’re going to have to live at 100 basis points all-in.”

That amount would have to cover the broker-dealer’s piece, the custodian’s piece and the adviser’s piece, he said.

Evan Cooper is a contributing editor at InvestmentNews.