Weekly Briefings

Receive our weekly updates that focus on educational content and practice management ideas for investment managers.

Harvest Data Trends

When Financial Data Is a Source for Good

by Peter Hans
on April 30, 2018

When Financial Data Is a Source for Good

Advisors can ideally leverage this data to strengthen relationships by maximizing for relevance. 

Given Facebook CEO Mark Zuckerberg’s recent testimony to Congress on data privacy issues at the social media behemoth he founded, now is an opportune time for advisors to analyze the merits and considerations surrounding data. Specifically I’m referring to behavioral data of clients and potential clients. Advisors can ideally leverage financial data to strengthen relationships by maximizing for relevance. What better way to know your client and add value than to empirically understand what they care about.

Mark Zuckerberg

Copyright Chip Somodevilla, Getty Images 

The biggest and most influential businesses in the world are digital first. In addition to Facebook, big tech peers like Netflix and Amazon bring different value propositions because they succeed at using behavioral data. As I consider this dynamic in practice, Netflix knows what shows I want to watch, and I can only assume that Amazon’s Alexa listens to every conversation my family has. Is this a bad thing? Maybe, but it’s certainly a slippery slope.

In our world of asset allocation and financial advice, it’s only natural for investors who are also consumers of tech products to think critically about how their advisors and relevant service providers use their data. When handled responsibly, and with incentives aligned, behavioral data can truly be a force for good.

Practical Solutions 

For the financial planning industry, this behavioral data has the potential to not only be an asset to build more relevant client relationships, but also has the potential to be an integral part of compliance. For advisors on the front lines entrusted with individuals’ life savings, being able to transparently access the real time interests of clients, while archiving those data points, can represent an indisputable audit trail as to the rationale behind the financial products best representing the goals of the client.

Advisors oversee all the intimate details of a client’s life: assets, liabilities, income, expenses and legacy planning. The most personal and sensitive data is already firmly in the hand of advisors, however, there is little actionable intelligence that can be gleaned off such data. Behavioral data represents information that, although must be held in the strictest confidence, is broadly harmless in the wrong hands. Conversely, this intelligence represents advisors’ ability to better understand the true needs and interests of their clients. As a result, the selling of the behavioral data relevant to an advisor is irrelevant to a potential third-party buyer.

Our lives are filled with irrelevant noise, especially for those who allocate capital. Investment management will always have a human relationship element, but that relationship can grow stronger through efficiency. Advisors can best achieve this efficiency through the use of data, and so long as this is transparent and designed to align incentives, it’s a very positive thing.

Note: this was originally published in WealthManagement.com

Asset Manager Case Study

Harvest's Blog is a resource that focuses on educational content and practice management ideas for investment managers. If you'd like to begin utilizing Harvest for your firm, create your Company Page here