By Mike Overdorf, President and Founder, The Sycamore Company
Despite considerable investment in technology, data fragmentation remains a costly challenge for institutional broker-dealers and advisory firms that continue to depend on siloed systems and legacy databases to perform critical business functions. You’d be surprised by how many institutions are still running their business off spreadsheets.
This overreliance on outdated tech and old-school processes across operations, compliance, commissions, recruiting, and more has led to slower decision-making, wasteful redundancies, regulatory exposure, and missed growth opportunities.
The Path to Integration
Many firms are stuck having to manually reconcile gargantuan volumes of trade, client, and regulatory data. The process is very inefficient and very expensive. Data silos hinder reporting, complicate regulatory filings and have firms throwing too much time and headcount at processes that should be automated.
It’s not that data silos will put a firm out of business, but they will certainly prevent it from operating at peak efficiency. Decisions are delayed. Reports take weeks instead of seconds. And firms spend more of their time putting out fires than focusing on growth.
Tearing down data silos doesn’t mean a firm has to rip and replace every system. Instead, firms looking for a successful transformation should start small. The key is to begin by garnering strong buy-in from leadership and having a clear understanding of what isn’t working. Early wins will lead to more effective change overall.
Though firms may not immediately know where all their data is held across various silos, once they are committed to fixing the problem, they should identify the disconnects before bringing their siloed data into a unified system. For example, a large firm I recently worked with maintained a trade blotter in a spreadsheet that was updated manually and not cross-referenced with custodial data. We were able to ingest the data, integrate it with custodial feeds, and cross-reference it with separate systems for advisor data, client accounts, and more. In the end, we transformed a static spreadsheet into a dynamic, compliance-ready dataset.
Now, that same blotter is part of a surveillance module that can compare trades across advisors, branches, and asset types. The intelligence gained from this single integration was game-changing for the firm.
Turning Raw Data into Intelligence
As data from siloed systems is brought together, firms gain more than just consolidation. They gain context.
When integrating a data point – a trade, for example – it’s important to link it to all relevant information. In this case, the advisor, the branch, the client, the product, and the custodian. Doing so transforms the raw data into something a firm can act on, audit, and analyze. The newfound level of insight and intelligence can empower a firm to move away from operational reactivity and toward strategic proactivity.
When talking about dismantling data silos and improving firmwide intelligence, AI inevitably becomes part of the conversation. But while AI shows tremendous promise, it’s not the right tool for the job, for now.
Broker-dealers and advisory firms should be cautious of AI, as it can generate too many false positives. The emerging technology isn’t yet reliable enough for an industry that operates under such strict regulatory oversight, and there’s still a lot of work to be done to figure out how to adopt it responsibly.
Achieving Operational Excellence
The path toward operational excellence is clear: firms must do away with fragmented data environments. That said, the solution isn’t about leveraging flashy tech or undergoing the wholesale replacement of firm systems. Rather, it’s smartly executing incremental projects that help firms consolidate and elevate their data.
Those who embrace this path have more to gain than operational efficiency. Tearing down data silos will unlock smarter decision-making, faster innovation, and more opportunities for growth.
