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How Asset Managers Are Incorporating Big Data

How Asset Managers Are Incorporating Big Data

While the financial services sector has been slower to adopt big data than other industries, Envestnet’s purchase of data aggregation and analytics company Yodlee on Monday illustrated how all financial services firms are beginning to recognize the value to be mined from the oceans of data in finance.

And that's beginning to filter into the space that was, up until recently, perhaps the most resistant to big data analytics: The wholesaler strategy of asset management firms. According to new research from Cerulli, national sales managers expect predictive analytics to be the greatest change to their distribution strategy, with 47 percent calling the better use of data a "major priority" to better identify distribution opportunities.

“The use of data to guide wholesaler behavior is yet another touch-point in the maturation of this profession,” Scott Smith, a director at Cerulli, said in the latest Cerulli Edge report.

Smith called predictive analytics, which provide a statistical analysis of advisor actions and the likelihood to make future purchases, the “holy grail" in using data. With a detailed analysis of advisor behavior, asset managers could identify what prompts them to recommend specific products to clients, leading to more efficient sales practices.

Some firms are also starting to use data to track the profitability of their relationships with individual advisors.

Because an asset manager might pay commissions to its salespeople or the B/D firm when a sale is made, the longer the advisor keeps clients in the fund, the more time the asset manager can recoup those upfront incentives, making the sale more profitable, Smith said. “Asset managers widely cite using redemption data as one of the factors dictating whether wholesalers should call on specific advisors,” he said.

Though finance likes to draw inspiration from other industries on how to incorporate data, Smith added that there are many obstacles before big data analytics sees widespread adoption among asset managers looking to sell their funds through brokers. Firms that already have implemented data into sales practices reported the process to be challenging, but ultimately worth it, he said.

Cerulli said firms that have successfully implemented data-driven sales practices have done so in stages, beginning with a pilot program, and had wide-spread buy in on the strategy from all levels of the organization, including the sales teams.


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