Why your firm needs a data strategy

As a financial planner, you understand the importance of long-term planning. While accumulation and IHT strategies may be more familiar to you, have you considered what steps to take for the succession of your business?

Thinking ahead is essential, but you don't need decades of succession planning. Depending on the state of your client bank and data, we can recommend a strategy to give yourself the best chance.

In this article, we will focus on creating a transition path from the perspective of your data. Our goal is to recommend strategies and actions to help your data processes operate efficiently, sustainably, and profitably, with an eye on succession planning.

Are you collecting the required data for your clients? Probably the most obvious actions of the data strategy, yet you’d be surprised at how the ambition of minimising a fact find can lead to important data points falling off the radar.

• Complete KYC
• Vulnerability
• Policy information to both connect with providers for up to date valuations and to share with your clients
• Fees
• Client categorisation like segmentation and target market

The collection is due to get easier over time with open banking, open finance and integrations improving in general society, so for now we can skip onto the next point, possibly the most critical at this stage:

Back-office systems, digital fact find providers, CRMs, data warehouses have almost completely replaced the legacy of the paper file, spreadsheets and windows folders. Remember when using a spreadsheet was forward thinking or the keen bean in the office created an access database?

Between data security, efficiency requirements and the ability to use further technology, it is a must to have some sophisticated data storage system.

The way in which a business chooses to store and maintain this data also is key for the future opportunities to exploit technology. Automation is near on impossible without some sort of digital record and is essential for any type of digital engagement with your clients, something that can only increase.

Choosing a back office provider with an Open data strategy is a good start, but investment is often required to help populate the system, whether its a data migration, integration to investment providers, or other sources such as open banking. Structured data is key and something we as technology providers are keen to encourage and help with.

Data integrity isn’t a part time job (sadly). As technology and AI is embedded in processes, it will become easier. But for now we need operations and procedures to make sure our data solution is continuously reliable, trustworthy and as up to date as the sources allow.

At a minimum, these activities can take place through the review process where a client is consulted to update their details or their policy valuations are gathered and confirmed for the system, but ideally there are automated mechanisms to update and reconcile data.

Whether your strategy is to review and fix on mass, or ensure integrity from the source is a philosophical debate. But what’s clear is this area cannot be avoided.

Eyes on the prize - what does, collected, structured, accurate data get us - Analytics!

Analytics enables up to start measuring our progress as a business:

• Business performance metrics - growth, revenue, AUM metrics open doors for wider business goals such as acquisition or growth through equity or debt funding
• Efficiency - having access to see MI on your top and bottom clients, will help you deploy resources to where it matters most. It will ensure your clients are correctly segmented and release time to be spent appropriately
• Compliance - Structured data will not only save you time in producing regulatory reports, but the analytics will provide you with oversight and confidence into your staff, procedures and activities

Finally, what we all hope for with our technology- Automation. Our data strategy can cut costs, increase profitability, and better serve clients. The following steps can help us achieve this:

• Sending automated nudges, updates, and insights to clients can increase engagement, satisfaction, and potentially open up new business opportunities, leading to increased revenue.
• Providing portals to clients for receiving valuations on demand can increase satisfaction and reduce manual work from ad hoc requests.
• Automating data collection from clients through portals and digital fact-finds can save time and effort for both parties. Clients are increasingly willing to complete this information themselves online. They know the data best, so why not get them to add it right from the start and be responsible for keeping it up-to-date in the future?
• Automating data collection from providers is a challenging but rewarding task. Open banking technology for individuals is already available, and it's only a matter of time before the final piece of integration comes. Provider data feeds can be difficult to adopt, but they pay dividends once set up. The data and mechanisms will improve as the traditional platforms fight for their market share against the wave of white label options.

So, how do we create a strategy for your firm? Just like with planning, let's start with goals:

• Where do you want to be in 5, 10 or 20 years?
• Where do you want your firm to be in that time?

If less than 5 years, your strategy needs to adapt to where you want to be. Do you plan on selling your firm, partnering with a network or passing it on to others in the team? Firms with structured data and metrics are more attractive to buyers. It gives them insight into whether your firm is a good fit for their existing processes and products. Additionally, it makes integrating and migrating the data a lot easier. As a result, your job of cleansing the data pre-migration is mostly done in advance!

The further you go down the data strategy, the greater the potential value in your firm. However, it might not be necessary to fully automate if you plan on exiting within 5 years.

If your time horizon exceeds five years, automation should be your primary goal. Data grows significantly with each new client, regulation, or staff member so your teams and processes need support. Creating a scalable process that does not inflate your costs is crucial. To increase profits in the long term, it is essential to focus on capacity and business model. Understanding the model that best suits your business and either capitalizing on those client opportunities through increased capacity or adopting a low volume high-fee model can help reduce support costs and lead to business success.