The importance of data in wealth management: an untapped potential

Customers are underestimating the huge amount of data they own. Margins are under pressure due to the new regulatory and market environment. This means that the valuation of data should be a priority for any financial institution.

The recent regulatory changes (PSD2 and MiFID2) and the rise of Fintech have breached the monopoly of financial institutions at least on three growth drivers:

  • financial assets of clients;
  • transfer of money;
  • the financial advisory.

In fact, the PSD2 is a huge breaking point with the past because it forces financial institutions to open to third party providers (TPPs). If necessary they can use the infrastructure of these same companies to meet the needs of the customer, greatly improving the user-experience of the final consumer.

Regarding wealth management institutions, the context is even more challenging. The MiFID 2 regulation has established a new level of attention to the customer in terms of cost and transparency. Something that has never been seen before. Moreover, there are Fintech companies, which, through data analysis and technology, can guarantee an increasingly important level of customization.

Traditional companies have on their side a wealth of data, many years of experience in the field and knowledge of their customers. Fintech companies can only dream about it. Nevertheless, wealth management companies typically tend to underestimate the enormous potential of their data:

  • financial data, on current and past customer positions and movements, and on their payment flows – data from which it is possible to obtain information about investment movements, as well as on consumption and saving habits;
  • socio-demographic data, such as age, place of birth and residence, gender, family situation and so on, which are fundamental, for example, for framing the client’s investment life-cycle;
  • the answers to the MiFID questionnaire (which, if properly designed and filled in, can be a mine of information), that are crucial for extracting the client’s financial DNA;
  • customer-intermediary interaction data, such as those related to the use of their private area, the opening of any newsletters, the use of apps, phone conversations, and so on.

Not to mention the fact that, according to the GDPR, they can exploit such data, something that would not be possible for Fintech companies.


The value of data

Valuing data means having a holistic idea of the entire wealth management process. From customer acquisition to the broader post-sales phase, while maintaining a constant relationship with the customer. As well as paying attention to his needs and problems of course. Furthermore, in the digital era, the customization of the offer and the request for on-demand consultancy are undoubtedly two critical success factors.

First, working on data means focusing on business efficiency at all levels. From reducing customer acquisition times, to product cross-selling, to lower operating costs in terms of risk management or back-office. A data-driven approach can improve the company’s overall profitability. How? Working on revenue growth and cost containment, with an analytical control over the entire wealth management process.

To add a little more substance we can refer to a research made by the Boston Consulting Group, “Seizing the Analytics Advantage”. The research enlightens that the benefits of data analysis are measurable with a great improvement in margins on assets under management. An improvement that can be of 6-12 basis points. Plus, our experience suggests that we can go well beyond this figure. Especially when it comes to companies with great inefficiencies in their processes (in Italy there are many).

At Virtual B, we have developed a data analytics platform that enhances corporate data in full compliance with the rules. This is possible leveraging on our combined knowledge of financial data science. At the same time we answer to the most common business questions, such as:

  • Which needs do my clients have, and to what extent am I satisfying them?
  • Which customers are most likely to grow and create value?
  • Is my commercial offer appropriate (commercially and in terms of compliance) to the needs of my customers?
  • What do consultants need to reassure their clients?

Wealth management companies should have a holistic approach both to the needs of their clients and to their internal operations. This is important if they want to to differentiate themselves from their competitors. And to ensure a level of service that is adequate to the needs of their clients. In fact, data, in order to become a driver of profitability, must first become corporate assets.
As far as we have seen, the value of data is much greater than the one expressed by BCG. However, we will talk about this later.

Virtual B Fintech solutions

Virtual B has been working for years in the financial sector, with a close focus on data and data analysis. Our experience has led to numerous solutions that generate value and solve issues for financial and insurance intermediaries.

SideKYC® is an advanced data analytics software created by Virtual B for banks and insurance companies. SideKYC® can profile customers, identify individual needs and map them with the best product.

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1 – Global Wealth 2018: Seizing the Analytics Advantage, fonte: Boston Consulting Group