We all know there is a plethora of data out there when it comes to managing investment preferences, tracking investments and performance, applying overlays, keeping up with new investment types, and the like. But how much of this data is being analysed and personalised to provide the client with more engaging and informative conversations? Doing this can help wealth managers enrich and grow AUM and improve client outcomes.

Unfortunately, this valuable data is not always being put to its best use, which leads to missed opportunities to create customer insight, and address shifting customer expectations. 

Leveraging this data is all the more relevant given that the sector is undergoing a paradigm shift. Changing demographics, priorities and behaviours, the “Generational Wealth Transfer”, challenging macroeconomics, product democratisation, increasing regulations, tight margins, and ever-increasing competition - it all adds up, making wealth management more challenging. 

Customer value-add services driven by effective use of investment data will be key to survive these changes. Indeed, success will not be defined by the type or size of the wealth manager. Success will instead be defined by the extent to which the organisation can harness and leverage its data to drive an investment proposition that meets the needs and expectations of its client base.

But 2023 presents a challenging investment environment. Risk is rising for investors, global equity markets look uncertain, and volatile real estate and fluctuating crypto-currency prices make it difficult for wealth management firms to generate superior investment returns for their clients - or accommodate for investor choice and for the market pull. This makes effective data use all the more important to guarantee clients are fully informed of possible alternatives.

ESG is a particularly pertinent illustration of this. Bloomberg reports that ESG investments will exceed US$53 trillion by 2025, representing over a third of the projected total assets under management (AUM) of US$140.5 trillion. As a result, the ESG debt market could rise to US$15 trillion by 2025. Analysis reveals that 55% of global High-Net-Worth Individuals (HNWIs) invest in causes with positive ESG impacts they consider important.

So how are wealth managers setting themselves up to address this market opportunity and regulatory implications? Data sets are available from various sources and can be aggregated to provide insights. But how is this aligned at the investor level? Does the wealth manager know which clients are most likely to be interested in ESG as a whole, or particular elements of it? And can the wealth manager harness ESG data to present to those clients?

Indeed, as ESG-linked products become more widely available, cautious investors seek evidence of measurable impact. Two-thirds of HNWIs ask for an ESG score to know more about a fund’s societal impact and performance. But 40% of advisers said it was a complex task to obtain accurate ESG impact data, and 50% lacked clarity regarding sustainable investing ROI.

And while ESG investing has now become mainstream and even mandatory in certain jurisdictions, it comes with challenges. Regulatory scrutiny will be essential as investors seek assurance against greenwashing. 

Wealth management firms, therefore, need to solidify their position as trusted advisers to their clients by presenting the relevant data sets, from the back-office systems to the available ESG and fund performance data. 

But with such a high percentage of advisers highlighting the complexity and lack of clarity across these data sets, how much money are they leaving on the table, and why effectively not advising their clients in the way they want to be?

This complexity also exists when it comes to digital assets. 70% of HNWIs globally are invested in digital assets (including more than nine out of 10 of HNWIs younger than 40). Cryptocurrencies are the favoured digital asset.

As demand for specialised portfolios escalates, more investors will opt for a direct investment strategy. This growing complexity of assets and the necessity to adjust to volatile markets and uncertainties mean that access to data will become a differentiator.

Relationship managers must understand strategies for newer types of assets and the new (ESG) metrics applied to existing ones. The underlying infrastructure, tax implications, and details about returns to balance associated risks need to be explainable using meaningful data drawn from a range of sources. Wealth managers who adapt to this new data-centric world will be able to compete more effectively and win more market share. Can they pivot and launch more products and services to match client and regulatory demands? 

SaaScada’s team (www.saascada.com), with their experience learned from launching one of the UK’s first digital banks in 2014, have already factored these needs into SaaScada’s architecture with a powerful and scalable event processor allowing dedicated real-time data projections and queries. By combining this data at the ledger/product level across multiple asset types (from banking products to investments and alternative assets) with supplementary data, insights and projections can be formed to provide immediate contextual data for proactive decision-making. 

From product and investment recommendations to aligning investor appetite for digital assets to capturing the mass affluent, the best practice use of data is central to the success of wealth managers. Without it, they will struggle to identify opportunities or drive forward their industry capabilities beyond traditional products and services to increase wallet share, grow AUM, retain existing and attract new customers.