From Big Data to Smart Data

Big data is no longer the future: it’s here today, driving success in thousands of businesses across the financial sector. In 2016, IDC Research, Inc. (IDC) predicted that the banking sector would be one of the most significant drivers of growth in the big data and business analytics industry, with revenue potential of $22.1 billion by 2019. But there’s a substantial difference between simply having access to a high volume of data – customer data, market data or otherwise – and having the tools and platforms to use that data effectively to improve results and maximize efficiency.

In fact, managing big data can often result in major inefficiencies. In the healthcare industry, for example, Health Data Management found that for every hour physicians spent face-to-face with patients, nearly two additional hours were spent on maintaining electronic health records and doing other clerical work. In financial services, ThinkAdvisor reported that one RIA firm, Maryland Capital Advisors, found that the logistical labor of managing all their data and reconciling the previous day’s transactions meant that they couldn’t actually start each new day’s work until 11am or 1pm. The data itself was there and provided insights; however, the cost in time and trouble of making it usable was too high.

Turning to smart data

So the successful financial big data platform of tomorrow must also be the smart data platform of tomorrow. It needs to provide insights that save advisors time and make data management tasks easier. For example, a platform for RIAs might integrate automatic data sharing, single-sign on, reconciliation, a client portal, rebalancing assistance and data aggregation insights. Combining these tools and blending data from different sources can help advisors manage their day-to-day logistics, while arming them with new and better insights into their customers’ consumption and investment habits.

By doing so, smart data tools can save advisors time and help them provide better insights to their clients. A study of financial advisors conducted by Aite Group found that across many groups of advisors – from independent broker-dealers to independent RIAs to bank/trust advisors – those who use smart data platforms were able to spend more time with their clients. Overall, bank/trust advisors saw their time available for client relationship management increase by 62%, independent broker-dealers saw a 28% increase and independent RIAs a 19% increase.

Providing thoughtful insights

Unsurprisingly, a more intimate knowledge of a client’s investment needs and more time to engage with them can foster deeper and more meaningful relationships with clients.  Some banks even estimate that integrated, smart data platforms might help each advisor serve more than 6 times as many clients by managing messaging and identifying valuable insights to share. In addition, smart data analysis can help advisors keep their clients on track in difficult times for the markets. For example, platforms that help advisors conduct systematic rebalancing could have enabled more investors to shift correctly from bonds to stocks during the 2007 financial crisis, reaping greater returns and reinforcing those clients’ loyalty to their advisors.

The firms and advisors that find the best mix of human expertise and today’s advanced and intelligent tools to turn this mass quantity of information into actionable decisions, process improvements and wise client counsel will be taking the lead in the world of smart data. They will enable their advisors to spend their time on the thoughtful, interpersonal work that only a human advisor can do.

Envestnet, Inc. (NYSE: ENV) is a leading provider of intelligent systems for wealth management and financial wellness. Envestnet’s unified technology enhances advisor productivity and strengthens the wealth management process. Envestnet empowers enterprises and advisors to more fully understand their clients and deliver better outcomes.

The opinions expressed herein reflect our judgment as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities, or investment advice or a recommended course of action in any given situation. Investment decisions should always be made based on the investor’s specific financial needs and objectives, goals, time horizon, and risk tolerance. Information obtained from third party resources are believed to be reliable but not guaranteed. This paper may contain ‘forward- looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this paper is at the sole discretion of the reader.

Sources

Worldwide Big Data and Business Analytics Revenues Forecast to Reach $187 Billion in 2019, According to IDC, IDC press release, May 23, 2016.

EHR use consuming physicians’ time for patients, Greg Slabodkin, Health Data Management. September 7, 2016.

Is Your Technology Working Against You?, Savita Iyer-Ahrestai, ThinkAdvisor. March 27, 2017.

Technology Integration Turbocharges Advisor Productivity: Making Time for Clients, Aite Group, September 2016

Wealth managers play ‘robo advisers’ at their own game, Richard Henderson, Financial Times. March 30, 2017.

Envestnet’s Bergman: Robo-Advisors, Automation Critical for RIAs’ Success, ThinkAdvisor. September 14, 2016.