The financial advisory industry is very much a data-driven business, and yet nontechies can be intimidated by some of the jargon and buzzwords that surround such information. Clearly, advisors need to use the data that they have collected to improve the service they offer and enhance their firm's performance.

From the first interaction with a prospect to the last day with a client, financial advisors are collecting and storing all types of data. Birthdays, vacation homes, risk objectives and historical investment performance, to name a few, are collected and stored in advisors' computer systems.

Here are a few ways to use data that you already have to improve your practice and improve your bottom line.

1. Harvest data for risk analysis across your entire book of business.

In light of regulators' recent work to standardize a fiduciary code, harvesting stored data for risk analysis across your entire book is becoming ever more necessary. Unfortunately, many risk management vendors ask for data in a specific form, making you gather new data from your current clients or repurpose stored data into new formats. This can take weeks to complete. Instead, make use of the data you already have.

Work with an IT employee, consultant or technology provider to help you filter your book of business by risk objectives that you already have entered into your database, and then group your accounts by such objectives.

We all know that economic conditions change over time, and a portfolio that once fell within a client's risk objectives could easily fall outside of their objectives today.

To isolate these outliers, work with your custodian or investment technology provider to create criteria to find accounts that are out of alignment with stated risk objectives. For example, find all accounts that are assumed to be conservative and yet have a greater than 30% allocation in equities. Once you have isolated the accounts, make changes to bring the accounts back to reflect the right risk-tolerance levels and document your findings and actions for compliance.

2. Mine data for marketing.

Data mining is an overused buzzword, and yet it represents an essential activity. It yields smarter and more effective marketing campaigns.

Thanks to recent advancements in financial technology, you can now fully utilize your stored data to get in on the action. Instead of sending the usual birthday greetings and informational emails on disclosures and tax changes, I encourage you to mine your data for opportunities that will directly impact your bottom line.

Economic changes that affect only certain accounts are great fodder for successful email marketing campaigns. For example, you could work with your custodian or investment technology provider to isolate accounts with high bond duration, which are likely to be adversely affected by rising interest rates. When interest rates start to rise, direct an email marketing campaign at these households, explaining how their current investments will be affected by interest rate changes, letting them know that there are alternative investments and telling them to contact you for more information. 

Here are two more email marketing options:

  • Sector risk and news.  Be ready to react to investment related news. Let's say the tobacco industry came into the news because of some new finding that tobacco use causes yet another disease. You can then run a query against your entire book and find all of those accounts that have greater than 50% of their assets in equity, which also have an average tobacco concentration of greater than 25%. With these results, you may start a campaign along this line: "People are smoking fewer cigarettes every day. Did you know that a substantial portfolio of your investment portfolio is allocated to Big Tobacco and could be affected by such trends?"
  • Held-away account risk. You can also ask your investment technology provider if you have the ability to analyze your clients' held-away accounts. If you do, you can run a query to find all held-away accounts that exhibit 20% more risk than the assets managed by you. With these results, you can start a campaign along the lines of "the assets we're managing for you are historically a lot less volatile than your assets that we're not managing. We'd like to schedule some time with you to further explain."

The positive results from this type of targeted marketing that has an explicit call to action will surprise you.
The time is now to talk to your technology providers and brainstorm on ways that you can repurpose your stored data to impact your business positively.

Michael Wilson is president and COO of AdvisoryWorld, a provider of investment analytics, portfolio modeling and proposal generation technology for the financial services industry.

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