When it comes to intel in financial services, “the more the better” is the rallying cry that has launched a thousand data collection platforms. The creation of these aggregation technologies has, in turn, given rise to additional tools that analyze, integrate and standardize data pulled from myriad sources. After all, data is useless until it is transformed into information. And it is standardized back-office data that helps to inform the customized client interactions today’s investors demand.
Like a medication that ameliorates one issue only to create or exacerbate another, a wealth management firm’s ability to gather massive amounts of data points has led to operational difficulties not anticipated – or vastly underestimated. The promise of artificial intelligence shines a spotlight on the obstacles that have always surrounded data, as firms consider how AI will transform their data gathering, management and use capabilities.
Wealth management has always had a data problem – not a shortage but an overabundance of siloed data spread across many locations, with little integration. This has created challenges surrounding how firms deploy their valuable data effectively. In an effort to illuminate these obstacles, Digital Wealth News spoke to Phil Nuttall, Chief Operating Officer at Stratos Wealth Holdings, for his insights on the current information ecosystem, what hurdles his firm has encountered and the tools Stratos has put in place to overcome them.
Digital Wealth News: Can you briefly describe what is problematic surrounding data in the wealth management space? What issues have you found within your system?
Phil Nuttall: Multi-custodial RIAs of any size can have similar challenges in accessing data from multiple custodians. Not only is it a labor-intensive, time-consuming process that can be expensive, but it can create dependencies on a limited number of technology vendors who have deep enough integrations with the custodians.
Working to standardize that data and de-duplicating client household records can introduce yet another challenge, especially when you start to add in third-party assets that are used to provide financial advisors with a comprehensive view of their client’s investments.
The need to accommodate different tools, custodians and data sets can lead to operational complexity. It can also create inefficient workflows and can introduce the need for manual intervention and workaround. It can make simple tasks more difficult.
DWN: Has this been a hinderance to your firm’s growth?
PN: I do not believe the data management challenges have hindered growth at Stratos Wealth Partners, but it does create technical challenges for what should be simple operational tasks. It also creates some vendor dependency that can hinder advisor flexibility. I believe it is critical, as we continue to grow, that we don’t allow ‘technical debt’ to build up.
DWN: What remedies or solutions are available?
PN: There are different paths and possible solutions to problems, and I don’t believe there is a universal answer. Some firms could go down the path of deeper tie-ins with an ‘all-in-one’ type technology platform, but this can make firms critically dependent on a vendor and potentially vulnerable to future pricing strategy.
Another approach is to be more selective and attempt to reduce the number of data sources (think custodians and third-party investment advisors) along with software tools available to their advisors to help create a simplified technology stack that works together well. This can come at the expense of advisor freedom, choice and innovation.
Firms can also build their own data and software solutions to help solve the problem in a way that is specific to their needs. This can often be a very expensive investment with a long development cycle and could be fraught with risk and complexity.
A final option could be searching for an innovative solution that attempts to combine all three elements of the above.
