By Mike Overdorf, President and Founder, The Sycamore Company
The financial services and wealth management industries have entered an era of big data that has transformed how the back offices of broker-dealers (BDs) and registered investment advisors (RIAs) support their organizations. From creating operational efficiencies and enhancing workflows to supporting regulatory compliance and ensuring accurate and timely payouts, data-driven insights are increasingly relied upon.
However, to take full advantage of the big-data boom and maximize the value of seemingly endless and complex datasets, these back offices need clean, high-quality data to operate, analyze and conduct business activities most effectively. Without clean data, they can be exposed to weak analytics, errors and even client mistrust.
So, what is clean data?
Clean data is accurate, complete and free from errors or inconsistencies. It should be up-to-date, non-duplicative and relevant. This may sound simple, but with myriad data sources in different formats inundating BDs and RIAs every day, obtaining, normalizing and maximizing that data can be overwhelming and resource-intensive.
To combat this, a growing number of BDs and RIAs are leveraging advanced data aggregation technology to cleanse, audit and enhance the quality of their data. This can bring speed and efficiency to their operations, compensation processes and compliance fulfillment.
Three Ways Clean Data Delivers Better Business Outcomes
- Clean data builds trust. When the back office maintains accurate records, the benefits extend beyond the brokers and advisors they serve because when BDs and RIAs deliver accurate and consistent information to their clients, it leads to greater transparency and strengthens client confidence. Additionally, the ability to leverage clean data to provide bespoke client communications and share accurate market trends, risks and opportunities can bolster the relationship.
- Clean data makes brokers and advisors happier. Clean data helps the back office make more well-informed decisions faster. With clean data and the right tools, operational efficiency can skyrocket by reducing time spent on correcting errors and reprocessing transactions. Clean data can also help ensure compliance with regulatory obligations. This mitigates the risk of penalties and provides peace of mind. In general, clean data helps BDs and RIAs sleep better at night.
- Clean data opens the door for AI and machine learning. Without clean data, AI and machine learning efforts may be fruitless. Both technologies rely on algorithms that use data to learn patterns and make recommendations. If the data is old, incomplete or inaccurate, those recommendations can fall flat. In the absence of clean data, BDs and RIAs cannot take advantage of the AI and machine learning boom which is disrupting the industry and catapulting those who use the technologies to greater success.
Achieving clean data is the result of following a few critical steps. Step one is to get as much of your data as possible in electronic form. This helps eliminate the risks and inefficiencies that come with antiquated paper-based systems. Step two is to aggregate and normalize that data so that you can input it into your system in a common architecture. This means reorganizing data to create a standardized format across your system. Step three is ensuring you have a system in place that can perform data maintenance, which means auditing and correcting data so that it remains accurate and accessible. While following these steps may seem daunting, the results are most certainly worth the effort, leading to improved decision-making, greater operational efficiency and more.
Do not underestimate the importance and power of clean data. Big data is transforming the financial services and wealth management industries and those who don’t get on board face the threat of being left behind. Only with clean data can you effectively join the data revolution and unlock its potential.
