Approximately 90% of the world’s current data was created in the last two years, giving you an appreciation not only of the amount of data we all contribute as individuals each day via emails and tweets, but also the vast range of data available to advisers to help them run more efficient practices, segment their client bases and better service their customers.
Yet to date, despite its value being likened to a form of currency, this data has been somewhat of a latent resource of information and knowledge in the wealth management world.
In a recent HUB24 research paper titled HUB24: The future is now: Digital disruption and generational change- what will they mean for your business?, we discussed how digital tools will become increasingly vital for licensees and advisers in cementing trusted relationships with their clients. Further, by leveraging data, licensees and advisers can uncover business efficiencies and develop solutions that enable them to better service their clients and deliver on their value proposition.
USING DATA TO UNDERSTAND YOUR CUSTOMERS
In many ways, the financial advice industry is at an inflection point, a pivotal time in its journey. While the industry wrangles with the ongoing challenge to remain competitive in a changing business landscape and new customer segments requiring different propositions for example millennials.
Futurist Rocky Scopelitti notes the wealth of the millennial generation will continue to grow during the next decade, and if the advisers can provide the right customer value proposition, this will represent a growing proportion of the typical financial adviser’s customer base. To service this generation, advisers will need to speak their language to deliver the tech-driven user experience they are used to.
Additionally, advisers are continuously challenged by the regulatory landscape, Investment Trends’ 2021 Adviser Technology Need Report found 66% of the advisers surveyed identified compliance as the top challenge (up from 64% in 2020), followed by the provision of affordable advice (51%), regulatory uncertainty (43%), and administration of fee disclosure statements (FDS) and client opt-in (30%).
While the solution to these challenges is complex, leveraging data and technology will be key to advisers adapting to the trends of the future and building new business efficiencies and processes that make advice more cost-effective and accessible.
DATA AS PART OF THE SOLUTION
With the introduction of the Consumer Data Right (CDR) legislation and the rollout of open banking that is moving towards open everything, access to data is being streamlined.
There are still many challenges that face the industry in terms of aggregating and understanding data, particularly the need to cleanse and structure it to ensure it is fit for purpose, and to ensure its safety through strong privacy and cybersecurity controls.
Technology has been racing ahead and there are now many data analytics tools available from the likes of Google, AWS, Microsoft, IBM and many others – facilitating the handling of huge data sets and computing power to apply artificial intelligence, machine learning and robotic process automation to the task.
HUB24 is well advanced in its journey to leverage data and technology to develop innovative product solutions for advisers and licensees that create value and enable the delivery of accessible and cost-effective advice.
In 2018, HUB24 established a thinktank of leading advice licensees to work together using technology and data to identify and solve key issues facing their businesses. Not surprisingly, compliance remains a key challenge for thinktank participants and the industry - reducing advisers’ time with clients, increasing their stress levels and adding to the cost of providing advice.
Further, not having a single view of their clients’ wealth and being able to see clients’ preferences and behaviours are obstacles to the evolution of a more tailored customer experience.
UNLOCKING DATA TO GAIN INSIGHTS
Just like the broader financial services market, platforms have continued to evolve to generate ‘platform alpha’ to create multiple sources of value for clients. While in the past, platforms were custodian of assets, the future of platforms lies in their ability to leverage data and technology to reduce friction for advisers and licensees to create efficiencies and reduce costs.
An estimated 20% of data from advisers in a structured format which means the majority is held in documents such PDFs, Word files, emails and in CRM systems in unstructured and often inaccessible formats. A key focus of HUBconnect is providing access to this information, cleansing it and combining it with the structured data.
Following this, machine learning and artificial intelligence can then use this data to provide insights and create predictive actions and personalised user journeys.
USE OF ALGORITHMS
There are a myriad of formats, layouts and information in unstructured data in wealth management. Just consider the variation in Statements of Advice that are often modified by advisers from the standard formats to better meet their customers’ needs. For machine-learning algorithms to function properly you need to train them on relatively large volumes of data. This can be an intensive process with the need for human intervention.
Further, there are a number of challenges such as the time and effort needed to cleanse poor quality data before it can be used to train the models. There is often irrelevant or non-representative data that can lead to biased results from the algorithms and ensuring the model is fit for purpose and not over or under engineered.
By working with a group of licensees, HUBconnect has extracted information from more than 500,000 documents and categorised them with over 90% accuracy.
Once this process has been carried out, the power of the data can be enriched through the addition of structured data and qualitative data to add further value to advice practices and licensees. It can deliver proactive compliance and deep business insights to improve their operations and the ability to better service their customers.
The true power of artificial intelligence can also be leveraged to carry out propensity modelling, which are predictive models built to forecast behaviour of a target audience by analysing past behaviours. This will be the next step for wealth management.
THE WAY FORWARD
We are collaborating with licensees, advisers and brokers to deliver innovative solutions that empower better financial futures and enable the delivery of cost-effective advice.
Data is the key to industry transformation, and HUBconnect focuses on getting the data right by providing integrated data feeds, automated reporting and analytics - that drive advice efficiencies and replace manual, time-consuming and costly practices that increase the cost of advice.
There are a proliferation of fintech solutions in the industry, and through efficient access to more holistic data, advisers and licensees can create highly-tailored ecosystems to take services to their customers to the next level.
HUB24 is on this journey with advisers and licensees and investing in the future because we believe we have a role to play in addressing industry challenges, to help them meet their compliance obligations and to make advice more accessible and cost-effective.
Darren Stevens is chief product officer at HUB24.