New report finds issues with firms' data aggregation processes.
Senior-level management at wealth management firms should be increasing their oversight of data management practices, according to a new report from Aite Group.
The report, “Wedding Divorced Data Sets: Data Maturity and Governance for Institutional and Retail Asset Managers”, looks at 26 firms from around the globe and concludes that almost two-thirds of them vest data management responsibility with either IT or operations staff.
“That's how data management oversight is traditionally structured,” said Virginie O'Shea, Senior Analyst of Post-Trade Technology at Aite.
A primary issue, according to the report, is the data aggregation process. This stems from the difficulties in extracting data sets from end systems and rationalizing those numbers so that they are compatible with other systems, such as risk analytics or regulatory compliance tools. These complex activities deserve the attention of a firm's top executives because their perspectives are necessary for proper integration of this information, the report said.
“Only senior-level managers can make sure the process of reconciliation occurs across the system,” Ms. O'Shea said.
Erik Brynjolfsson, Director of the MIT Center for Digital Business and Professor of Information Technology, says that his research, featured in the Harvard Business Review, supports a greater role for top-level executives in a firm's data management procedures.
“Companies that integrate data have measurably better performance,” he said. “Our top recommendation is for executives to take leadership role in the area.”
Mr. Brynjolfsson views these lessons as applicable to the wealth management business, seeing three trends contributing to the larger shift in analytics: volume (unprecedented amounts of available data), variety (a shift from acquiring information through standardized databases to all kinds of disparate sources), and velocity (financial professionals are equipped with tools to track the markets in real time). Given these shifts, the strategic organization of a firm's flow of data becomes all the more significant.
But he warns against a basic instinct within the organizational hierarchy—the desire to confirm the decisions of leadership.
“A serious pitfall is when a manager comes to a decision using gut instinct, and then they go and tell the IT department to gather some data to support that decision,” Mr. Brynjolfsson said. “It ought to be integrated right from the start.”
