Why your wealth management practice needs roles-based data

Collecting and analyzing the right kinds of data can make a huge difference in the growth of your RIA firm, but many firms lack a clear data strategy.

The quality of their data may be questionable, their data sources overlapping and too few or too many people in the organization may have access to the data they need to fulfill their role in the firm.

“Having a data strategy is one of those processes you absolutely have to have to scale,” says Craig Iskowitz, a business and technology strategy expert and founder and CEO of the Ezra Group. Iskowitz was one of several panelists participating in a recent discussion of roles-based data strategy hosted by AdvisorEngine.

A well-designed data strategy is more important now than ever given the growing use of artificial intelligence and other new technologies.

Whether it’s managing client investment performance expectations, matching client needs with advisor expertise or developing a process to scale, data can play a crucial role, but only if the relevant data gets to the right person in the organization.

A CEO, for example, will want cost-to-serve metrics and other productivity benchmarks, while the head of client services will be more focused on response times and client retention rates, said Grant Speer, product manager at AdvisorEngine.

There are three major steps RIAs need to take to develop a data-centered practice with a roles-based data strategy: take stock of their current strategy, if they have one; build a plan to develop a meaningful and workable strategy; then execute it.

Develop a data strategy

First, RIAs need to be clear about the key objectives of their firm so that they can develop a data strategy that can help them achieve those goals. Then they need to ask about how they’re handling the data they collect. Where are they getting the data from? What systems are feeding it? Is the same data coming from multiple sources?

The answers will help assess the quality of their data, which is “one of the biggest roadblocks” to an RIA’s growth, said Iskowitz. “Insights to support critical initiatives rely on data. If your data isn’t clean, if it isn’t well organized, those initiatives are going to not go as well.”

Who is in charge of the data and who has access to the data are two other important considerations for RIAs.

“Even if you have different leaders playing different roles with different kinds of data that they bring to the table, it makes sense to have a single point of ownership at an RIA,” said fellow panelist Justin Boatman, chief product officer at Nitrogen. “Folks in your firm should know who to ask about how you store data, access data and get the most out of the data.”

That person could be the chief compliance officer, the head of operations or the head of technology, Boatman said. “If you aren’t sure who it should be, maybe it’s best to ask who calls the shots with your technology systems.”

Understand insights needed

Once an RIA has carefully reviewed how it collects, uses and oversees its data and checks for any shortfalls, it’s time to develop a comprehensive data strategy that aligns with the organization’s goals.

First, understand what insights your firm needs, which derives from the kind of firm you’re running, and how your business is structured, said Iskowitz. Then set priorities, making sure you have the necessary data to support those critically important areas first. Don’t forget to include structured (i.e. the client information found in your CRM) and unstructured data (emails, texts, meeting notes).

“If you’re an emerging or smaller firm, make sure you’re just taking advantage of what technology you’re already using and what those firms can offer you,” Boatman said. “If you’re in-between and you’re scaling, don’t be afraid to ask for help.”

“You want to make sure you’re feeding the system, the platform, the technology you’re utilizing to run your business with the highest quality data,” said AdvisorEngine’s Speer.

The data an RIA collects can be used to measure how well your firm’s operations stack up against its goals, and to assess what parts of the business are working and what parts aren’t; what clients are most profitable; and which advisors are the best and the worst performers.

It’s helpful to break down the data into the individual role level metrics for each category of staff: advisors, client service staffers and operations personnel, among others, to gauge their performance.

“What gets measured, gets managed,” Speer said. “Data is the lifeblood for the whole picture.”

Get employees onboard

Once an RIA has built a data plan, it’s time to execute, though perhaps not all at once. If clearly defined processes haven’t been set up already, the data strategy will likely evolve in phases, according to Iskowitz.

Optimizing a data strategy requires buy-in by a firm’s leadership, budgeting for the strategy, and employee training and communication, said Iskowitz. “If you don’t explain to your employees, your advisors or admins or staff why you’re doing this and why it’s valuable, they may not be on board, and you need them to be on board,” Iskowitz said.

A governance framework and data quality controls should also be established, said Iskowitz.

Finally, feedback at every level across the organization is crucial. RIAs need to know they’re looking at the proper metrics, tracking them and really understanding where this effort is paying off and if it’s truly impacting the bottom line at the firm, team, department or other level,” Speer said.

Data strategy, Speer added, is “a living, breathing thing that needs attention, feedback at every level to really make it meaningful within the organization.”