Without data standardization, advisers miss opportunities

With such an emphasis growing on data, advisers need to be aware of not just what they’re getting from their technology, but what’s being put into it.

Data is by all means a substantial feature of advisers’ practices. It holds their clients’ most personal information and provides a stage for which advisers can analyze and build their businesses. But the industry has yet to see data standardization — that is, inputting and using information on these platforms in a universal manner across their firm. The consequences include a tough time for advisers integrating various software programs or missing opportunities to apply client and business insights to their practice.

“The larger issue isn’t that there’s poor quality, it’s that there’s poor consistency,” said Lowell Putnam, co-founder of Quovo Inc., a data services company for advisers. “Wrangling this data and conforming to multiple systems is very difficult and time-consuming.”

That an adviser can improve an advisory practice by utilizing data evident.

In a March 2015 Capgemini study of 1,000 businesses across a number of sectors, 65% said that big data is a key enabler of their company’s effectiveness and competitiveness. About half of those who responded have already implemented big-data technology into their business and 21% are planning to do so within the next year.

In order for advisers to see that promise, however, there will need to be some changes to the system — or at least a little help from data-management experts.

Unfortunately, advisers aren’t in full control of how they receive their data. Custodians, which provide firms with their client data, do not all store information in the same types of files and formats. Mr. Putnam said this could be solved by the creation of a single data format across the board to provide advisers with the ability to switch custodians more easily.

Jon Patullo, managing director of technology product management at TD Ameritrade Inc., said the custodian responded to this issue by creating an open-architecture account-management and trading platform, Veo, which currently includes 90 vendors.

“We really made an easy way for vendors to get data from TD,” Mr. Patullo said.

But it’s not an easy thing to do.

“Trying to get those all in sync is a fairly large task,” he said.

Mr. Patullo also said that TD would be open to collaborating with others to standardize data if an industrywide effort were to happen.

Rich Cancro, chief executive of Vanare, a customer relationship management platform for advisers, said something similar happened in the equities market years ago when Fidelity Investments and Salomon Brothers created Financial Information eXchange protocol, which acts as a standard for communication about securities transactions and markets.

“It would be great if the industry decided to do something like that to help with the data coming from custodians,” Mr. Cancro added.

The number of investment products available to advisers is a roadblock for data standardization. How they hold their data and the unique features they provide are what set them apart from competitors — standardizing such details would strip them of their differentiating factors, some industry players argue.

“Data standardization is a great idea, but I don’t know if we’ll ever get there,” said Aaron Guidotti, CEO of Big Brain Works, which offers the Grendel CRM system. “If you had universal data standardization, you really wouldn’t have different [data-management] applications.”

Advisers can work around the lack of standardization by enlisting the help of service providers and consultants who can normalize and organize data. By doing so, advisers can take advantage of data that can help them gauge how efficiently they’re working and engage with investor trends that could help them to win over more prospective clients.

That may be the best bet for advisers now, as a standardized system for data is far on the horizon.

“It is unrealistic to assume the industry is going to adopt a data standard, not that they don’t want to,” Mr. Putnam said. “Changing out systems to create standardized data is a huge undertaking and unlikely to happen in the near term.”