The digital financial experience will soon be all about a market of one, based on an individual’s needs rather than mass-market offerings.

“Customer data is the essential life blood of this digital transformation. It will only be successful with a customer data layer at its heart,” says Anton Honikman, CEO of wealth management platform MyVest, speaking at SourceMedia’s In|Vest conference in New York.

To illustrate, he highlighted new apps and technologies in the retail sector , saying that in the past you would select a shirt from a store shelf based on certain measurements like neck size. Clothing was produced on a mass scale based on generic sizing. But now retail companies are rolling out services that will scan your body collecting personal data and then produce a bespoke shirt, tailored to you.

“Things are being produced for me based on my needs and measurements. I can send new measurements if there are any life changes, say I’ve been on a diet,” Honikman adds. “The app can recommend things based off my purchasing history. It can let me know when new fabrics or products are available.”

Financial services, he argues, needs to operate with the same principle in mind.

Aite Group's Alois Pirker and MyVest CEO Anton Honikman
Financial firms should invest heavily in client data aggregation to see the best payoff for their digital strategies, say MyVest CEO Anton Honikman and Aite Group Research Director Alois Pirker. Patrick McLain


But getting there will require a big investment from financial firms. A majority of the market remains very weak on digital strategy, says Alois Pirker, research director of research and advisory firm Aite Group’s wealth management practice, speaking at the same In|Vest panel . “They don’t have a custom strategy, they’re inheriting it from existing vendor relationships.”

Common stumbling blocks to building a strong client data layer come from a fragmentation of client portals, 100% reliance on vendors and the outsourcing of all digital operations, he noted.

The size of the firm didn’t impact whether it had a progressive digital strategy or was using client data, Pirker added.

“The distinction between small and large companies is not dominant. It is between agile and do-not-care firms,” he says.

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“The best asset you have is the data but it is also the worst treated,” says Alois Pirker, research director of research and advisory firm Aite Group’s wealth management practice.

Firms with a progressive digital strategy share a few commonalities: they have an appetite for change, are independent of the back office, have a willingness to spend on technology, are at least considering robo or hybrid advice, and have a client data layer built inhouse or through vendor solutions.

“A client wants to know how they’re doing. They don’t care about the shelves of the back office,” says Honikman.

But to really be able to turn from a product view to a client view, firms need to aggregate and collect more data not just about specific products such as insurance, annuities or 401(k)s, but also non-financial factors such as family, health, education, profession, life stage, and goals.

“We need a plethora of data to get a much more granular segment, to get to a utopia of one,” says Honikman.

Most firms today are not equipped to handle clients based on such factors.

“The current segmentation of clients is based on a single number like asset level, it is based on factors affecting the profitability of the firm. But it’s these other parts like health and life stages that will become more important,” says Honikman. “We need to re-architect systems around more dynamic factors.”

The pair see this client data layer as the foundation for such changes, noting that firms who build a strong layer will not only be able to create content for individuals, but drive firm intelligence on identifying marketing opportunities, better empower advisors and spur revenue growth.

Aite found advisor revenue can grow by 16.7% by utilizing such data .

“The best asset you have is the data but it is also the worst treated, says Pirker. “It’s being treated as a bi-product and we need to be smarter about what we do next.”

Kerri Anne Renzulli

Kerri Anne Renzulli is senior editor of Financial Planning, On Wall Street, and Bank Investment Consultant.