Data can be a precious commodity for an RIA. But like so many raw materials, this highly sought-after resource can become a significant liability if they aren’t used, managed and stored properly. Not enough data can prevent a firm from growing. Too much data can overwhelm systems, advisors and even clients. The typical RIA has access to large volumes of data, tracking and storing most interactions clients have with the firm. In my view, the challenge is understanding how to gather, normalize and structure to use it effectively.
In the age of artificial intelligence, it is generally assumed that the more data an enterprise has the better. And while that could be true, RIAs may be having an issue managing large quantities of data being held across too many silos. Poor data management can lead to inefficiencies, lost opportunities and possible security concerns.
We believe RIAs know they have a data problem. How they deal with it can help determine long-term success.
How Some May Have Gotten Into This Position
Innovations in digital technology and the proliferation of third-party service providers have done much to level the playing field over the years, allowing for tremendous growth of RIAs. Some financial advisors no longer needed to work for wirehouses, banks and large wealth management firms to serve their clients with distinction and make a good living.
Consider how the following tools have helped to change the RIA landscape:
• Custody—Fidelity, Schwab and LPL Financial
• CRM—Redtail and Wealthbox
• Portfolio management tools—Orion, Black Diamond and Advyzon
• Financial planning tools—eMoney, MoneyGuide and RightCapital
• Marketing automation tools—HubSpot and Salesforce
Each of these tools offers something a little bit different that can potentially enhance the support and services an RIA provides its clients. However, each tool gathers data and keeps it in a separate location, while often marketing its ability to integrate and yet, could be adding to the difficulty of data management. From a client service perspective, something as simple as a client updating their address now may become an exercise that requires updates in multiple different tools and can create the possibility of data conflict/quality issues. Data that is not structured, easily verified, accessed and analyzed may not be as useful.
Larger RIA firms can have an additional problem if they allow advisors to use the platforms, tools and systems they prefer. One of the potential benefits of independence from a wirehouse or bank is not being mandated to use prescribed technologies. Giving advisors freedom, flexibility and choice means firms that seek to empower independence cannot have a fully homogenous tech stack. This makes managing technology, and the data that comes with it, a problem that must be overcome.
Potential Solutions
Different organizations have their own approaches to data management. At our firms, we are working to implement a “data lake” with the intention to streamline operations and improve efficiency. This solution may be what underpins the data strategies of large technology pioneers such as Netflix, Airbnb, Uber and Capital One. We expect that our solution will not only centralize and organize data from multiple sources but will likely offer an innovative interface to allow easy access to the data for our advisors.
By adding a layer of analytic tools, we can leverage data to help improve overall advisor and client experiences, improve our internal workflows and help our advisors solve some of the common integration issues they face when using their chosen technology tools.
In our experience, lack of data has never been the issue for a firm like ours, it is about harnessing and synthesizing the data we have access to down into a usable product for the potential benefit of our advisors and their clients.
We plan to help our advisors be better business owners by providing them with data that helps them understand risks in their business, possible growth areas and ways for them to potentially increase the value of their business.
Data can be the lifeblood of an RIA. Accurate, safe and accessible data can help firms analyze their business, determine how it stacks up against competitors and better develop near- and long-term growth strategies. In a quickly evolving industry, we firmly believe data management needs to be given the proper attention to solve inherent problems in the way RIAs collect, secure and use the data at their disposal.
Phil Nuttall is chief operating officer at Stratos Wealth Holdings, a family of companies focused on supporting the growth and success of financial advisors across business models and affiliation structures. Andree Mohr is president of Integrated Partners, an RIA known for helping advisors grow their businesses organically.
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