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Whether you’re focused on improving risk management, pursuing sharper business-development strategies, or enhancing M&A outcomes, data analytics will improve your RIA’s overall success.
But the science of interpreting raw data in quest of actionable insights is painstaking. It requires advanced techniques of machine learning and artificial intelligence to turn masses of information into usable business intelligence. Even where business leaders understand the value of data analytics, they’re often hobbled by cumbersome legacy systems, operational stumbling blocks, and unrealistic expectations placed on small in-house data teams to extract this value.
With data analytics, RIAs can thrive
It amazes me how many business leaders don’t take – or even try to take – advantage of the success optimization that data analytics can provide their firms. That’s why we got together with Envestnet to establish Advisor Services Exchange, ASx for short. We realized that by combining Envestnet’s technology and access to RIA data with Dynasty’s expertise in platform services and providing comprehensive support to independent wealth management practices, we could help more RIAs excel in a marketplace galvanized by rising client expectations, effort-saving technologies, and rapid consolidation.
In this way, Envestnet’s RIA clients – already experts in customer service – can leverage data analytics on par in terms of quality and immediacy with what’s available to the biggest firms. To be clear, access to ASx is exclusive to Envestnet’s institutional clients.
Five supercharged ways data analytics can help RIAs succeed
As a technology offering, ASx has a head start. Dynasty has been supporting independent advisors for nearly a decade, building up significant capabilities to support RIAs in the process. This track record, and the two firms’ immersion in independent wealth management, contrasts with industry-agnostic analytics providers that tend to focus on “big data” and the largest firms on Wall Street.
There are five main benefits to using data analytics in the context of an independent RIA.
Better business decisions
Having access to your firm’s data in a rationalized format that is additionally benchmarked against the broad RIA market yields more specific answers to the questions and issues that may be holding your RIA back. Data analytics allows for a performance-based approach that increases the overall financial health of the firm while accelerating enterprise value through transparency.
Increased speed
Data analytics turns cumbersome manual tasks into fully automated processes. The resultant speed means RIA personnel have more time for working directly for clients – the single best defense from rival incursions. Operational speed also has ancillary benefits. For example, an RIA presented with a pressing strategic opportunity may get access to capital quicker through ASx – for the simple reason it can provide more insight on its workings than a rival that doesn’t have analogous information to present to would-be funders.
Superior risk management
What aspect of running an RIA is likely to keep its owner up at night fretting? Compliance, right? There’s just so much to know, and so much to keep track of – and one small mistake can have catastrophic consequences. Data analytics puts parameters and rules around compliance, giving owners and executives more time for other pressing matters. You can synchronize your compliance program with calendars and checklists to ensure your documents are accurate and up to date, and that your staff are following the proper procedures.
Streamlined client acquisition
Data analytics helps with marketing by empowering RIAs with a better understanding of its clients. In turn, this helps firms personalize marketing messages for distinct client segments – and evaluate the effectiveness of their marketing outreach.
Strategic M&A
Whether they seek to buy or be bought, data analytics is a boon to RIAs. Just as firms with access to data analytics have a significant strategic advantage over those that lack it when it comes to fundraising, a data-savvy RIA can understand its current value, learn how competitors are valued, spot opportunity and formulate an M&A strategy ruled by evolving facts – not just guesses and wishful thinking.
A data-analytics offering tailored to RIAs also eliminates a double-barreled drawback to dealing with raw data: It’s meaningless without interpretation – and big-data analysts knowledgeable enough about the RIA space to interpret output are in short supply.
The future of RIA-centric and hyper-relevant data analytics
In this light, an offering that (a) draws on an RIA’s real-world outcomes in the context of the broad wealth-management industry, and that’s (b) formatted specifically for wealth-firm staffers makes more sense than trying to go it alone or benchmarking against unrelated industries.
Further, data analytics for Envestnet’s RIA clients will provide better benchmarking over time as the sampling pool grows.
The point of data analytics isn’t to replace the RIA owner’s “gut” or intuition. It’s to put business planning on solid ground by minimizing guesswork on the way to meeting strategic goals. Studies suggest data analytics helps businesses identify key initiatives and improve their decision-making processes, which should sharpen your instincts and help take your RIA to new levels.
Down the road, ASx could even support a Michelin-Star type ranking of RIAs – though that’s secondary to the goal of ensuring advisors are using best practices and industry guidelines to help them operate as efficiently as possible.
Ed Swenson is president of ASx and chief operating officer of Dynasty Financial Partners, a wealth-management platform provider based in St. Petersburg, Fla.
Read more articles by Ed Swenson
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
