Wealth management is built on data, but the modern digital ecosystem has made it tough for firms to effectively leverage their datasets.
The biggest challenge facing wealth management firms regarding their data is the difficulty of integrating it across multiple specialty technology platforms that were never designed to work together. Brian Costello, the Head of ByAllAccounts Data Aggregation Strategy for Morningstar Wealth, noted that 90% of firms are using between four and seven platforms to manage their various operational needs. In many cases, these firms find themselves establishing individual connections to each platform, when what they really need is a one-to-many model -a seamless and reliable way to distribute their firm and advisor-level data across the various platforms they use. Costello pointed out that the absence of such connectors leads to bottlenecks impeding the efficiency of operations and innovation efforts.
Working in these data silos can lead to a plethora of other problems, with data disparity being the most prevalent. For instance, a firm might have multiple separate connections to a data source across their operations, but each connection generates variations, leading to inconsistencies in the data firms receive.
According to Costello, “There’s just too many instances where we’ve noticed variations, either in timing or the actual underlying data. A firm may find data related to clients, advisor, or the firm itself doesn’t reconcile across different systems. Ensuring data reconciliation and having a single source of truth is essential – it’s table stakes in wealth management.” This issue is so widespread that ByAllAccountsfrequently helps clients build a unified data repository by funnelling data from various sources into a data lake. The ByAllAccountsplatform has been designed to provide the one-to-many functionality that firms need, enhancing their operational efficiency.
What potentially makes the data connectivity issue more challenging is a misconception within wealth management firms that financial data potability and integration across wealth management platforms is easy. To the contrary, wealth management data access and data utility requires significant coordination and, in many cases, custom development across the data providers, the intermediaries and the data recipients.
”ByAllAcounts, a wealth data network from the MorningstarWealth, is designed to help firms streamline data connectivity. A single connection to the ByAllAccounts network opens access to a variety of data providers, reducing friction and improving operational efficiencies. Firms can focus on the value they’re trying to deliver to their clients, rather than having to waste time working on internal plumbing, he said. The ByAllAccounts DataNetwork has access to over 15,000 data sources, of which, over70% are direct connections. This direct access enhances reliability far beyond traditional data collection methods. Moreover,ByAllAccounts brings over 23 years of experience in wealth data enrichment and can adapt data for various wealth management use cases, including prospecting, rebalancing, tax optimization, performance reporting, and compliance. Costello explained, “Firmscan make a single connection to us to get the data they need, in the format they require, rather than building out data connections themselves.
”Alternatively, for firms looking to publish data, such as custodians and financial institutions, ByAllAccounts facilitates connections into over 70 redistributors and over 50 wealth platforms used by wealth management firms. The single connection to ByAllAccounts makes a firm’s data and products readily available to more than 16,000 advisors and other financial professionals, thereby expanding their total addressable market.
The role of AI
It is impossible to discuss innovation and the future of business without the topic of artificial intelligence (AI) cropping up. The technology is top of the mind for most businesses, with the recent advancements of generative AI only intensifying this. As businesses start to explore the implementation of AI, they need to realize that technology can only reach its full potential when it has access to high-quality data, Costello said. This is not just the case for the most advanced levels of AI, whether it’s relatively simplistic technology or advanced computation or generative AI, clean, structured data is the bedrock of its operation.
Wealth managers are fully aware of the importance of data for their jobs, but this doesn’t mean they should be experts on how to get that data ready for use. Costello said, “They are keenly aware of what happens when the technology system fails them so that they can’t do their job. What they don’t really understand, because they’re not technologists, is what’s happening under the hood.
”This is why it is vital firms seek a partner they can trust to ensure their data is clean, normalized, enriched and ready to use. A wealth management firm should not have to worry about collating data and ensuring everything is correct, they should be able to just focus on their primary role of providing financial advice. “If my car doesn’t start in the morning, back in the day I used to be able to open the hood and figure out what the problem was. But right now, it’s fairly binary – it’s either working or it’s not working, and I need to take it to the mechanic. So, wealth managers have an opportunity to understand a little bit about how the systems work, but they need to have trust in the technology and data providers that they pick.”
The importance of open banking in wealth management
Open banking is an initiative pioneered by the European Union with the goal of helping consumers share their data held at financial institutions with third parties to get more personalised support. Countries around the world are starting to build their own open banking initiatives, contributing to the estimated size of the market, which Global Market Insights expects to hit $122bn by 2032.
One of the countries starting to make moves towards open banking is the US. Last year, the Consumer Financial Protection Bureau proposed rules that would allow individuals to provide third parties with access to their financial data held by financial institutions.
Costello welcomed the US’ move towards open banking, noting the asymmetry that has resided in the wealth management sector. He stated that for brokerage accounts advisors have limited legal right, through representation agreements, to access brokerage data. However, there is a grey area around accessing client’s financial accounts at banks and credit unions. Access to this data has only gotten harder over the years as these institutions implement security controls to block fraudsters but that interfere with delegated access to the account.
Costello added, “With open banking, the ability for a consumer to permission their financial data held by these banks, to their advisor via an intermediary, like ByAllAccounts, is going to get rid of a lot of that asymmetry. However, it’s not ready yet.” The initial phase of the regulation does not cover brokerage accounts, retirement accounts or 529 education plans. “It’s a great start, but we still have to smooth out those asymmetries to ensure advisors can continue to get that full 360-degree view of all of their clients’ accounts.”
Open banking is also too far off in the distance that it’s not on the radar for most wealth management firms in the US. As such, it is important for the industry and regulators to continue working towards the goal so it can become a reality. One of the next steps Costello would like to see is greater understanding and support for delegated access. He noted that in some scenarios an authorised advisor can act as an agent on behalf of their client on the basis of a representation agreement. Unfortunately, these relationships are not completely understood or implemented in digital ecosystems.
“Open banking has really focused on the single account holder, sometimes a joint account holder, authorizing the bank directly via a sometimes-cumbersome digital experience. However, millions of Americans aren’t doing that, they’re using an advisor, a financial planner, or somebody as that duly authorized agent. So, getting the role of the advisor recognized in these digital flows is very important.”
How ByAllAccounts can help
The ByAllAccounts platform ensures wealthtechs and wealth management firms are ready for both open banking and AI futures. Its technology is ensuring firms can solidify their data infrastructure by breaking down silos and reducing integration complexities.
As Costello highlighted, not all data aggregation is created equal. For instance, retail data aggregation is homogenised, while wealth data aggregation is still highly complex. ByAllAccountshas spent the past two decades focusing on the complexities of wealth data across all of its facets. This laser focus means the data it provides clients are absolutely fit for purpose.
Explaining why firms should partner with ByAllAccounts, Costello concluded, “The ByAllAccounts Data Network functions as a comprehensive wealth data network that facilitates data portability within the highly fragmented wealthtech ecosystem. It facilitates a seamless flow of data across the wealth ecosystem.No matter the use case, whether you’re looking to distribute your data to a variety of platforms or onboard you’re the advisor’s managed accounts, we can help. With just a single connection, you gain access to essential data, ensuring high-quality, reliable, and enriched information. This is complemented by dedicated service and support, ensuring all your data needs are met efficiently and effectively.”
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