SAN DIEGO -- For many corporations, the big deal about big data is the potential to monetize it for big money. The big data analytics market is expected to grow to $53 billion this year, according to PwC.
But Schwab has no plans to monetize the client data it collects from the thousands of advisors it serves, reiterated its top technology officer, Tim Heier.
Heier fielded the question from a concerned advisor during a panel discussion on technology at Schwab's annual conference. Traditional avenues of revenue for custodians, such as trading, have been eroded, he noted.
"How can we be sure, partnering with Schwab, that through the data and machine learning, that you continue to be on our side, as opposed to making money for your shareholders, by the access to the information that our clients share with you, by being our custodian?"
"We have no intentions around data," Heier, Schwab's chief technology officer, said in response. "We have other ways we make money."
Heier recognized that technology firms like Google and Apple have provided hardware and software as a means of collecting data from customers.
A number of firms advising financial institutions have highlighted the opportunity to mine and sell the client data they collect. Back office outsourcing giant Envestnet, for instance, is making Yodlee’s data analytics and aggregation available to advisors for a fee.
Despite the temping financial opportunity to sell data analytics gained on advisor clients, it would be very damaging to the custodian's relationship with them, says Joel Bruckenstein, co-creator of the Technology Tools for Today conference series.
"Advisors would just leave Schwab," Bruckenstein says.
Heier explained Schwab's hands-off approach to monetizing data is a commitment that is backed by policy.
"We have agreements and user policies, and it's all there in the fine print, what we do and what we don't do," he said. "Fundamentally it's not our business."
Afterwards, Heier expanded on Schwab's commitment, explaining the firm doesn’t see it as strategic or in its best interests.
"We have gotten requests from companies that we do business with and third parties, whether it is anonymized data sets or disaggregated data sets, and we always turn them down," Heier acknowledged. "We make our money custodying assets."
It would contradict Schwab's role as a custodian, he added.
"We value the trust and the faith clients put in us in the maintenance of their data and money over what might be incremental revenue opportunity from commoditizing and selling that data. That equation wouldn't be in our favor at all."
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