Wealth managers and firms working with them are building data analytics tools that may give financial advisors an edge with clients and prospects from the first meeting to every significant event of their lives.
The burgeoning wealth technology could usher in a massive application of the marketing concept called “next best action,” which revolves around amassing information about a client then using the knowledge to make a tailored sale, start a long-term relationship or just assess whether to pursue the customer, according to a panel of executives from Envestnet | Yodlee, AllianceBernstein and Buckingham Wealth Partners speaking at this week’s Financial Planning INVEST Connect conference. Financial firms of all kinds are waging an arms race on technology, with the best use of data analytics as a pivotal factor.
Still, analytics carry risk: SEC Chair Gary Gensler said earlier this month that the regulator is studying how and when predictive tech constitutes a financial recommendation. Any rules restricting what Gensler described as “an inherent conflict” in which firms are using data analytics in a way that’s “steering the retail public” could leave some methods outside the rules. For now, companies such as the data aggregator Yodlee, which is part of tech and turnkey giant Envestnet, are developing their collections of data tools to assist advisors.
The firm is working on a “recommendation engine” aimed at driving “a simple outcome, which is the next best action for the advisors at the right time at the right place to advise their clients,” said Chief Data Analytics Officer Farouk Ferchichi. “We’re kind of behind the scenes, helping the advisor in three ways.”
For starters, using “complex life event models,” Envestnet can predict the next major step for a client and give advisors a sense of how to craft a personalized message aimed at them, Ferchichi said. Next, the firm helps advisors convert the approach into the right product or service. And, lastly, the software explains how clients could consolidate assets into an advisor’s practice based on how a different fund manager or another vendor has a better performance track record for a particular type of product in a portfolio. With a reach spanning 108,000 advisors and $5.4 trillion in client assets, Evestnet’s engine could power a lot of growth.
The same holds true for AllianceBernstein, which has more than $738 billion in assets under management as a global firm in the asset management, research and private wealth sectors. Next month, the firm plans to launch what it calls “Oculus,” a project to give its sales team the full use of the firm’s data and that of third-party sources in one location, said Koley Corte, the firm’s global head of transformation.
Oculus will enable the team to “get a full view of the customer and all their touches with us, how engaged they are,” Corte said. “And that will also give us a profile of where there’s opportunity or risk. So, that’s a big undertaking for us.”
Firms like Buckingham are clients to AllianceBernstein and data analytics firms in their own right. As the owner of an RIA and a turnkey wealth platform, Buckingham spans $26 billion in advisory client assets plus $40 billion in additional assets under advisement, according to Chief Experience Officer Rob Ziliak. The firm is already using “pre-populated and predefined timelines” alerting advisors to possible estate planning, tax strategies, risk avoidance or any other actions to take during the course of a client relationship, Ziliak said. Buckingham is now creating a dashboard in its customer relationship management software to aid advisors.
“What they still have the latitude to do is change when they deliver any given form of advice to the client,” Ziliak said. “But it’s at the click of a mouse within the CRM. So we’re really looking to use that data about client relationships to empower the advisors to give a more personalized and scalable service offering to the client.”
As promising as the technology may sound, the level of information wealth managers are deploying could ultimately run into barriers if regulators and lawmakers crack down on the collection of data by firms like Facebook, Google, Amazon and, indeed, large wealth managers. The panel’s moderator, Gavin Spitzner of Wealth Consulting Partners, quipped that “you don’t want to know what people know, on an anonymized basis, about all of us.” Some wealth tech firms, at least, are using data analytics for planning rather than other applications, he said.
“So much of the early focus of next best action was very product-oriented, ‘What’s the next product we can sell?’” Spitzner said. “We’ve evolved as an industry quite a bit past that, to whether it’s next best engagement, a term I’m using more, or really serving the client, presenting these ideas in a way that resonates and helps them see how this is going to improve their financial life.”