Family Office
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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