Data is everywhere and can be incredibly powerful for financial advisers and wealth management firms. But it can also be overwhelming and daunting. Used correctly, data can provide incredible insights and improve workflows and the client experience. However, if used improperly, data can cause headaches and compliance challenges.

What do wealth management firms need to know about data? Let us dive into the basics every adviser should know.

Data matters

To start, let us answer the most basic question: Why is data so important? Data provides insights that advisers can not gather on their own. It combines information about a client’s demographics, preferences, and finances with industry trends and transactions to show how a client fits into the larger financial picture.

Data and its corresponding insights are invaluable to wealth management firms and help complete a wide range of tasks, including:

• Client segmentation for customised marketing and product recommendations
• Fraud detection and compliance to protect clients and the firm
• Risk management to provide personalised and accurate recommendations
• Financial performance tracking to generate reports, measure effectiveness, and track finances against a client’s goals

Simply put, modern wealth management firms likely can not stay in business without a strong data strategy. Data-driven personalisation matters to clients, with 70% of clients saying they consider highly personalised service a key when choosing an adviser. Data provides the foundation for high-quality client services and makes it possible for firms and advisers to perform at a high level.

Where does data come from?

It is one thing to understand the importance of data; it is another to actually gather it and create a comprehensive data strategy. Many firms know they need to prioritise data but are not sure where to start.

The first step is gathering data. Data can come from numerous sources. Some of the most valuable data comes from clients themselves, especially in the lead generation or new account opening process. Using personalised digital forms (such as those easily available through PreciseFP), advisers can collect basic information about clients, including their income, age, and family status.

Other client data will come over time, such as notes on a client’s preferences after each meeting with them. Advisers can also make notes of a client’s risk tolerance, values, timeline, and important milestones.

External data is also crucial. Tracking overall market trends and each account individually provides data on how funds are performing. Even data from accounts the client does not have can help create customised recommendations. Successful firms look at past data (such as how funds have performed in the past), current data (such as how markets are performing now), and future projections (such as how funds will look when a client retires).

In short, any data that can impact and improve the client experience is valuable. The key is to focus on the most valuable data (which will become evident over time) and store it in a useful and accessible way.

tify, disclose, and mitigate conflicts of interest. Conflict management needs to extend beyond basic disclosure. Advisers must actively work to limit conflicts.

Making data work for you

Collecting data is just the first half of the process — the true value comes in storing and analysing data. Set your firm up for success with a robust and connected data system that can organize and combine data and identify patterns and trends.

Most back office employees do not have a background in data science, so trusting the data can be challenging. Advisers say disconnected data is a major barrier to innovation, and 62% of financial leaders say improving access to siloed data is a top data initiative.

However, when used properly, data can create a personalised experience that boosts client satisfaction. A single, cloud-based storage system like Docupace creates one source of truth and ensures all information is accurate and secure. When client information is updated in one place, those changes are reflected across all appropriate channels.

Keeping data safe and compliant

One of the biggest challenges with client data is staying compliant. Firms must follow regulations around how data is stored and how clients are notified. Most data compliance regulations fall under these rules:

• The SEC’s Regulations S-P require firms to notify affected clients within 30 days of a data breach. The rule was recently updated to improve customer data protection. It requires firms to create written incident response policies and procedures to protect and properly dispose of client information and recover it from cyber attacks.
   
• SEC Rules 17a-3 and 17 a-4 require firms to maintain digital customer and financial records for six years and trade confirmation documentation and communications for three years.

Data can be challenging, but Docupace makes it easy. No matter the size of your firm, Docupace can help keep things organised and running smoothly. Our industry-leading document storage software integrates with dozens of other platforms for a streamlined experience. Click here to schedule a discovery session.

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