Seize the data with expert advice

Seize the data with expert advice

by Lori Goodfellow

Is your wealth business growing or stagnating? How efficiently are you running practice? How do your results compare to peers? Data can be a precious tool for advisors to manage their client needs and plot their business trajectory. With analytics tools more readily available, it would be foolish not to take a look!

You often hear the phrase: Data doesn’t lie! While this may be true, it certainly can be misleading or misunderstood. For data to be valuable, it needs to be:

  1. Reliable.
    Imagine you are being evaluated on sales targets, only to find out the data being used doesn’t contain the full set of revenue sources? Advisors need to know that the data they rely upon is complete and of high quality. This also means the inputs are relevant and consistently gathered in order to be comparable over time.
  2. Timely.
    Stale data results in stale decisions. Interpreting data requires an understanding of its shelf life. Data might be relevant for seconds (stock prices), a day (fund prices) or a month (generally consistent data, such as dividend rates). In the current context, with volatile 2020 markets, one example of the importance of timely data is rate of return (ROR). It is critical to review ROR that is calculated daily. Even with a long-term focus to investing, reporting “old” ROR (from the previous month end) leaves a bad impression.
  3. Relevant.
    It is important to consider the audience that will consume the data. The most relevant data in the wealth management industry can be viewed through a business lens, ensuring the conclusions are significant, and with the appropriate level of granularity. For example, comparing assets under management (AUM) over time is interesting, but not particularly helpful if the objective is to identify the source of the change. To achieve this, you must derive how much of that AUM change is from natural market growth versus how much came from assets gained or lost from new or former clients.

The Wellspring of Wealth Management Data

In Canada, the ability to transform data into key performance indicators (KPIs) varies widely from one firm to another. Most firms are able to share the baseline data that is required for advisor rankings and asset or revenue measurement.

Ten years ago, an advisor could expect static data to arrive once a month in an Excel spreadsheet. The content was often simple, and left to the advisor to analyze.

In the last five years, it has become more common for wealth management firms to have dedicated internal teams that focus entirely on the availability and interpretation of data. Gone are the days where each department manually compiled and summarized their data, often with disparate perspectives.

Today, a firm-wide business analytics strategy is fundamental. Investing in centralized tools and the ability to aggregate large amounts of data from multiple sources has been an important part of this transformation. Now advisors are more likely to use dynamic dashboards where one can view timely data from different viewpoints, with trends, filtering abilities and even actionable items!

These dynamic dashboards often reflect firm objectives. They can often be used to encourage sales behaviour (demonstrating trends on fee-based products, insurance, etc.), or provide a reminder of best business practices (number of households, know your product). In addition, the ability for an advisor to see where they stand with peers can be motivating!

Even with all this data availability, the importance that a given advisor attaches to the numbers can vary widely. Some more traditional practices where growth is no longer a driver are happy to view the dashboards on a monthly basis for general trends. Other more contemporary advisors will use the data to drive daily decisions and to actively track progress.

If you are looking to glean certain insights, here are some examples of insights that modern wealth management dashboards can offer:

  • ­Sizing up potential business growth? A well-maintained CRM dashboard can track the depth and probability of quality prospects and assets in the pipeline.
  • Measuring team efficiency? A well-segmented book of clients and consistent tracking of client service activities helps to see where team efforts are spent and whether they are profitable. A measured advisor can use data to predict the number of households that are sustainable and strive for quality over quantity, offering consistent customer service.
  • Unlocking hidden sales opportunities? A set of smart analytics can identify clients that are potentially in need of insurance or who would be amenable to fee-based products.
  • Proactively identifying non-standard client risk? A well-developed risk dashboard can identify unusual scenarios, such as high-risk asset mixes for elderly clients with stated low investment experience.

Advice from the Experts

We spoke with trusted leaders in wealth management to find out more about the data they look for and why advisors or sales leaders find it helpful.

Jay Slade is Vice President, Client Intelligence and Analytics at RBC Dominion Securities. Here’s what he has to say about the value of analytics.

“Two types of data advisors use to review their book of business are asset management data (e.g. movement of funds, revenue, pricing, growth and number households) and demographic data (e.g. client age, geography, family members).

The true value of analytics is realized when we review both asset management and demographic data. We can then understand the client journey and customize investment management and wealth planning strategies to help clients reach their goals. At RBC Dominion Securities, we have the people and expertise to create the best overall analytics and intelligence services for our client-facing professionals and management teams.”

Tom Horn is the Senior Practice Consultant at TD Wealth Practice Management. He shares how two key performance indicators are vital inputs to assess profitability.

“Two pieces of data that are key to monitor in a practice are median assets and median revenue. As an advisors’ practice grows and their offering matures, they can become more attractive to larger clients. The challenge is for an advisor’s growth strategy to adjust to meet the demands and needs of larger clients, be that in the service offered, the product shelf and often in their investment approach. We work closely with our advisors to help them adjust to this growth and challenge them to shed old thoughts as they mature.

Assets alone are not enough; the revenue is key to ensuring not only are you bringing in the appropriate client but that you are doing so profitably.”

Lynette Lewis is a council member, consultant with Gerson Lehrman Group. Her experience is grounded in advising wealth teams across many firms to improve their business practice.

“One thing I observe over and over again is that advisors continue to have way too many positions in their book. Often the data indicates teams are holding 600–800 different positions; it is simply not productive. From a compliance point of view, it is not possible to do adequate due diligence.

Data that provides insights into an advisor’s portfolio construction can also be valuable. It is common to see a home bias (not just country, but often regional) and it can shed light on diversification risks. I also see this in fixed-income products offered where there is a lack of global exposure, or negatively correlated yield producing assets.

From a client service perspective, and in particular where advisors are focused on high net worth clients, it is imperative for advisors to be aware of the proportion of their book that is registered vs. non-registered. A tax-aware philosophy is a requirement to service these clients.”


Experience it yourself, see the difference