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Viewpoint: Demystifying client-data consolidation

Vicki Morris August 12, 2008

Viewpoint: Demystifying client-data consolidation

Efficient, accurate data consolidation sharpens the wealth manager's advice. Vicki Morris is v.p. of marketing for NorthStar Systems International, a San Francisco-based provider of wealth-management software.

The number and variety of software tools available to wealth managers have exploded. According to a study by EMC BusinessEdge, wealth managers use on average 12 applications a day -- among them CRM systems, investment-proposal packages, portfolio-management engines, investment-policy and compliance software, product catalogues, data feeds, and data and research portals.

The trouble is, most of these applications aren't integrated. As a result, the amount of time wealth managers have to spend working on purely administrative tasks has increased sharply. Wealth managers find themselves cutting, pasting and re-keying information from one system to the next to serve their clients, stay compliant and generate new business. And, of course, this cuts into face-time with clients and prospects.

Busywork

In a survey of wealth managers conducted by investment-platform provider Curian Capital last year, 89% of respondents reported they spend 50% of their time on administrative tasks. In 2005, a similar survey by VIP Research showed wealth managers were spending just 28% of their time on administration.

There are several reasons for this increase. First, wealth management has grown in complexity. The number of alternative-investment products has increased sharply. Second, firms are subject to increasing regulatory scrutiny. As a result, wealth managers have to document and maintain compliance procedures on client-directed investment policies. As the industry has grown more complex, so has the software that wealth managers need to support their client base, and the software, in the aggregate, has become more unwieldy for wealth managers to handle.

The answer, simply, is integration: a holistic, centralized platform that connects stand-alone applications and promotes workflow efficiencies, resulting in an increase in wealth manager productivity, freeing them to spend more time with clients.

A matter of trust

Moving client data from one system to another can introduce error, and any errors can damage the wealth manager's relationship with the client, weakening a bond of trust that may have taken years to build.

For many organizations, how client data is captured, consolidated and managed is a firm-wide challenge. On the front end, for instance, a wealth manager may have to re-type client information from the CRM system into the proposal system. Or the wealth manager may have to copy information from the portfolio-management platform in order to update a compliance system. And back-office personnel have to key in data from customer faxes or handwritten forms. The more often that staff has to input the same or similar client information, the more likely it is for errors to creep in.

It gets worse when it comes to client financial data. If a firm doesn't consolidate and integrate data, its systems may contain contradictory or multi-formatted data that can skew results and make performance harder to interpret and explain.

When wealth managers are forced to use un-integrated applications, important client, product and account information can get lost as it moves, slowly and manually, from one system to the next.

Middle-office dilemma

Historically, integrating disparate systems has been a lengthy, labor-intensive and expensive process that occurs in the middle office. Usually part of the operations department, the middle office is where data is stored, managed and integrated to streamline business activity in the front office, where wealth managers interact with their clients. A typical middle office may include compliance, product management, and competency-center functions.

To operate efficiently, middle offices often require middleware to marry back-office transaction data to front-office client data. Put simply, middleware is software that integrates disparate systems. In the wealth management business, consolidating data from all relevant systems and delivering it through a single desktop platform allows wealth managers to get a holistic, 360-degree view of their clients.

However, many wealth managers say they can't provide holistic advice and investment management based on 360-degree client views because their firm does not consolidate data, according to a recent report by Aite Group. About a quarter of those who distribute products from multiple providers are unhappy with the way their firms handle data consolidation and feel a need to make changes on that front over the next few years.

Although most wealth management firms have placed a priority on front-office client service, many have neglected their middle office because they perceive that integration technologies are time-consuming to implement. But new technologies are now available that simplify the time and effort of middle-office integration. They unite disparate systems and then package and distribute data through a single front-office portal. These portals are embedded with best-practice workflow and functionality to make the wealth manager's job easier, helping him stay compliant and become more efficient.

Consolidation

To provide holistic advice, a wealth manager needs access to an array of internal and external data feeds and applications. The challenge for firms is to aggregate and consolidate data accurately into meaningful portfolio and 360-degree client views that can be easily used by wealth managers to provide relationship-building advice.

The process of consolidating internal and external information is a three-step process: aggregating the data, reconciling it and delivering it.

Aggregating the data involves bringing together internal and external investment data, loan and insurance data, with CRM, portfolio and performance accounting data. The data is then checked for accuracy and reconciled. Once the information has been packaged in a "graphical client hierarchy" or 360-degree client view, the information is ready for distribution. To make the most of client data, most firms find it useful to deliver client information directly to their wealth managers' desktops, client web portals and client-reporting systems.

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In summary, to be effective, wealth management has to be holistic, taking into consideration the client's entire portfolio, investment needs and constraints. With the operational challenges of data consolidation, however, firms don't always succeed in providing the service that wealthy clients require.

In a recent IBM study, a staggering 57% of wealthy clients said they aren't advocates of their firm and don't view it as a trusted advisor. In today's difficult market conditions, firms can gain the confidence of their clients by equipping their wealth managers with operationally sound, holistic systems.

Ultra-high-net-worth investors have, on average, 15 times more assets than high-net-worth investors and so require the highest level of wealth management service available. A third of respondents to NorthStar Systems International's 2008 Wealth Management Trends Survey believe that providing better service is the number one way for both firms and their wealth managers to differentiate themselves from the competition. -FWR

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