Mike Lee, Global Leader, Wealth & Asset Management,
Data is a subject that is top of mind for most organizations right now. It not only comes up in most of my client meetings, but also in conversations about sports, travel, health and numerous other unexpected areas.
Information has always been at the heart of investing, and the explosion of data volume and processing power means that every firm is enhancing their data strategy. Many firms look to pioneers within the investment industry for inspiration. But should they be looking further afield for ideas?
I’m a great believer in the value of diverse thinking. Investment firms should explore how other sectors are harnessing big data to improve customer experience as well as identify investment opportunities, particularly in areas that may not even exist today. This especially makes sense at a time when companies across the economy – from hospitals to government agencies – are reorganizing themselves around data.
The AI opportunity
Investment firms should leverage new data interrogation tools driven by artificial intelligence (AI), which is not a single technology, but a set of tools. That means AI can work with traditional customer data sets; with the growing volume of data derived from digital, verbal or face-to-face interactions; and with externally sourced customer data – the “digital exhaust” we produce from our smart phones.
When it comes to enhancing client experience, investment firms could learn from the way that legal firms and insurance companies use natural language processing (NLP). NLP can extract key data from lengthy documents in seconds, offering scope for investment firms to streamline client onboarding processes across every client segment.
The potential of alternative data
The flipside of using better data tools is the ability to harness more source data. Machine learning, a form of AI that teaches itself to spot patterns, is used in many sectors to extract value from unstructured data sources such as internet searches, social media chat, satellite images, shipping data, online sales and credit approvals.
Utilities firms illustrate one useful way to combine alternative data with customer information. They use these insights to predict when customers are about to switch, and to approach them with timely, targeted offers. Investment firms could do the same, offering alternative fee arrangements or other incentives to boost retention.
Smart data analysis is growing in health care too, with some providers combining patient data from wearable devices with geographic data to predict local demand for medication. In a similar way, wealth managers could use online chat and client location data to identify key events – such as a university graduation – that present an opportunity to offer clients some tailored, valuable support.
Investment firms can also learn from the consumer products industry, which is highly experienced in mining and analyzing customer data. EY’s FutureConsumer.Now. research predicts that personal data and preferences, interpreted by AI, will increasingly allow consumers to shape every aspect of their lives, creating better versions of themselves. AI will help consumers optimize everything from what they eat and how they feel, to how they spend their social time and progress their careers. It will even help them manage their personal relationships. Investment firms could capitalize by using AI to harness client data to play a larger role in what, how and when their clients invest.
Identifying future opportunities
A third opportunity that could flow from new data tools and sets relates to another vital aspect of client experience – investment performance.
Leading firms are already harnessing AI and alternative data for investment research, and specialist firms are even reported to be using neural networks for asset allocation decisions.
But once again, it may be worth looking to other sectors for fresh thinking. One example could come from pharma companies, which are studying huge volumes of patient and research data to try and identify future opportunities for drug development, or to redeploy existing drugs. Oil and gas companies are also using AI to help predict potential problems, and some hope AI could help them locate and exploit new resources.
As the availability of data, processing and analysis grows, firms could similarly identify long-term investment opportunities and ideas. This insight could help firms make the kind of early stage investments that were once limited to venture capitalists – a compelling attraction for institutional and high-net-worth clients.
My suggestion for investment firms is to start thinking differently about data and looking beyond their peers for inspiration. With the rise of industry convergence, firms that explore strategies outside of their traditional ecosystem may be in a position to get more value from data.