Maximizing client value: Why firms should upgrade their data aggregation

Harnessing a personalized, data-centric approach has proven effective in helping financial advisors retain clients and drive business growth.

A wave of disruptive technology is reshaping the wealth management industry. New ESG screening tools, generative AI and conversational ChatGPT marketing have helped firms elevate their offerings, increase advisor productivity and deepen and expand client relationships in a highly personalized and holistic manner. This modernization process is also reshaping and reimagining data aggregation. While wealth data management is more important than ever before — serving as the lynchpin connecting the fully integrated ecosystem of curated advisor solutions — many financial firms still seek to grow their business without harnessing the power of emerging technology driven by data and behavioral science.

Although it’s only human nature to stick with what’s comfortable, this strategy can hold firms back from reaching their potential. To improve their data offering and capture the benefits of a modern, holistic reporting platform, firms must assess their current data management system, determine how their platform can be improved, and take steps to modify their existing technology, whether through in-house capabilities or an external provider.

EVOLUTION OF DATA REPORTING

While many firms have adopted a “set it and forget it” approach to data management, wealth reporting capabilities have undergone a significant transformation over the last decade.

Data aggregation was previously viewed as a segment with limited capabilities, producing uniform aggregation solutions and standardized reports. Since that time, data aggregation has emerged from the periphery of companies’ business functions into the connective tissue that brings together disparate data sets into a single source — enabling financial advisors to view their client’s full activity and build hyper-personalized portfolios at a fraction of the cost of traditional wealth management services.

Today, digital wealth management platforms use algorithms and advanced technology to combine transaction and position data with demographic data, values and behavioral science. These insights are then used to provide educational material and digital marketing campaigns that foster client trust and increase investor literacy.

Harnessing a personalized, data-centric approach has proven effective in helping financial advisors retain clients and drive business growth. According to studies by McKinsey & Co., personalization can improve customer satisfaction by up to 30% and increase revenue by up to 15%.

HOW TO TELL IF YOUR DATA AGGREGATION SOLUTION NEEDS AN UPGRADE

For wealth management firms that haven’t reviewed their aggregation solution in the last five years and are no longer content with an autopilot approach, conducting an assessment that looks for these three signs is crucial to understanding how their platform is functioning:

1. Financial advisors must wait for overnight batch files to update account balances or positions: Trading occurs in real time. If a firm’s data aggregation is limited to T+1, they’re waiting longer than they need to — and longer than their competitors. Slow, overnight data isn’t going to meet the needs of clients expecting real-time updates and access to their accounts.

2. Data is not reconciled before it’s used: It’s common practice for legacy reporting platforms to provide synthetic or placeholder transactions as a temporary stop gap when data does not reconcile. In contrast, implementing the newest tech enables data to be individually held, queued, researched, validated, and then released for reporting.

3. The tech starts and ends with aggregation and reporting: Aggregation and wealth reporting are table stakes and don’t comprise full data aggregation. The most sophisticated platforms will also offer critical business processes such as document sharing and archiving, and personal financial management tools. API-first architecture — which allows every data element to be read, written and updated without a dependency on overnight file delivery — is also essential.

HOW CAN FIRMS MODERNIZE EFFECTIVELY?

In an industry where financial advisors are selling a similar menu of securities as their competitors, they must go above and beyond making ETF recommendations and differentiate through tools and service to drive business growth. Leveraging a data aggregation platform that encapsulates other functions of the advisor lifecycle, including digital marketing, security-based lending, advisor websites, and advisor compensation, can be a key differentiator in the race for new clients.

Top-tier platforms harmonize previously separate aspects of the advisor lifecycle. This gives advisors a complete view of their client’s financial picture, ranging from liability exposure to their day-to-day spending and saving behaviors.

By viewing this entire landscape at once, advisors can uncover client opportunities and anticipate their needs. For example, a spike in a client’s travel expenses could signal the need for a conversation on retirement or investments abroad.

Firms that want the benefit of a holistic system must decide whether to build these capabilities in-house or go to an external provider. Although an in-house option may seem appealing, most firms are better served by focusing on what they do best: helping investors develop their financial plans to achieve their goals — not building tech solutions.

When considering solutions from providers, ask questions that will reveal just how experienced they are, whether they can guide firms through disruptions with minimal impact, and whether their tech can set your firm on a path to modernization and unleash the power of your data. In exploring options, always invest the time on demos, trials and proof of concepts.

If a firm does decide to transition, larger providers can seamlessly transfer their historical data. While this doesn’t mean there won’t be growing pains along the way, external providers will help at every step of the process to ensure that firms aren’t on their own — resulting in a modern, optimized solution that elevates data for customers and financial advisors alike.

Paul Camuto is vice president of product and head of wealth aggregation and insights at Broadridge.