Capgemini spoke to Family Wealth Report about how the widespread use of web and mobile channels has boosted interactions between firms and clients - leading to more meaningful data.

“Big data,” a blanket term for large and complex data sets, has become something of a buzzword – certainly in the financial services industry but increasingly in the wealth management space.

According to a report last year by Celent, entitled Big Data in Wealth Management: The Search for Customer Insight, there are numerous areas where wealth management firms can use big data, namely: investment research, customer knowledge, risk management, and compliance and monitoring. The basic process of exploiting opportunities from it has three stages: gathering and capturing data; looking for patterns, correlations and anomalies; and visualizing material to review findings.

The report highlights that the demand for big data is apparent among banks, full-service brokers, self-directed brokers and registered investment advisors. The RIA space tends to use big data tools to boost advisor productivity and help with advisor retention and recruiting - particularly in the areas of CRM, trading, portfolio management and reporting. 

According to the World Wealth Report 2014, compiled by RBC Wealth Management and Capgemini, the sum of all a firm’s client interactions generates data that can be “mined” for “meaningful intelligence” and ultimately help drive strategic decisions.

In a sign that a growing number of wealth managers are recognizing this phenomenon, only last week did Accenture link up with Hortonworks to build out its big data and digital capabilities, in a move aimed at bringing “big outcomes from big data and analytics.”

“Data technologies are evolving rapidly, and enterprises and governments are challenged with how to adopt them while making sure the wealth of information is not inaccessible or underutilized,” said Narendra Mulani, senior managing director, Accenture Analytics.

Boudewijn Chalmers Hoynck van Papendrecht, a wealth specialist in Capgemini’s global wealth management network, spoke to Family Wealth Report about how the widespread use of web and mobile channels has boosted the number of overall interactions a firm has with clients and in turn created more meaningful data.

The concept flagged up by Boudewijn Chalmers Hoynck van Papendrecht centers on the idea that information about a client’s online and mobile activities, for example, sheds light on their behavior. Being such a client-driven business, the goal for “digitally-transformed” wealth managers is to have a complete picture of all types of interaction they have with clients and a clear sense of how effective these touch points are – in terms of meeting client expectations and attaining financial and strategic goals. 

“The understanding of client behavior is essential to providing the right type of service and aligning the right products and services in a way that clients want to be served,” Boudewijn Chalmers Hoynck van Papendrecht said.

Indeed, awareness is growing among wealth management firms of the opportunities to be had from extracting and analyzing data, but they “don’t really understand how to use it,” he added. “On the other hand, they know they have to do something with it.”

Client segmentation

One area that wealth managers would do well to focus on through a big data lens is on client segmentation models.

“Without knowing exactly who your clients are, you are not able to offer the desired customer experience,” Boudewijn Chalmers Hoynck van Papendrecht explained. “A needs-based segmentation strategy based on analysis of existing customer data and behavior, together with research on the target group, provides the data you need to start understanding your customers.”

The next step, he continued, would be to use the data to build a profile of each of the segments defined to provide a better understanding about the needs of each of these “homogenous” groups.

The idea is that more detailed client profiles shed light on the products they buy, as well as: historical background; social media activity; hobbies; values; channel preferences; and lifecycle stages.

“Based on this, you know what this group of clients wants and likes, instead of having all your relationship managers building their own understanding of the individual relationships within a CRM system,” Boudewijn Chalmers Hoynck van Papendrecht said.

Ultimately, he believes that if firms can pin-point client preferences and subsequently build segment-specific profiles, they will be in a stronger position to enhance the client experience - a notable shift from the more product-driven advisory the industry has seen in the past.

Echoing these insights, a recent white paper by SEI said that rather than honing in on clients’ wallet size, many wealth managers would benefit from restructuring their client segmentation model to account for investor behavior patterns. Categorizing clients by goals and behaviors enables wealth management firms to improve resource allocations by ensuring an efficient commercial distribution of products and services, according to the paper. On the other hand, some firms believe wealthy investors vary too much to be segmented - but that is not to say they don't have similar goals and attitudes.

Not just a trend

Big data “isn’t just a trend” – it’s essential for wealth managers to leverage the opportunities such analytics provide, Boudewijn Chalmers Hoynck van Papendrecht said.

Understanding changing client needs and behavior is crucial not just now but in the future, particularly given the highly talked-about wealth transfer from the Baby Boomers generation to the future-wealthy – a segment which, according to the World Wealth Report, is much more tech-savvy and thus expects services to be provided digitally. It said that while many wealth management firms have made big client relationship manager investments, some have struggled to realize the full value of doing so.

With the amount of data and intelligence constantly growing, the report said it will be critical that firms determine how to use it to “provide lasting differentiating capability.”

“Those that figure out how to convert data into meaningful information that they can act on will become the high-performance firms of the future,” the report said.

Boudewijn Chalmers Hoynck van Papendrecht added that client analytics has proven beneficial from the acquisition to the retention processes, which he believes is “critical for wealth management firms.”

He also emphasized the need for the “ownership” of big data initiatives to be driven from the executive level down.

“It’s not a one-off exercise; it’s ongoing and that’s why you need executive sponsorship to position it well,” he said, noting that it doesn’t mean someone has to be hired, but that “you have to get the capability in your organization,” he said.