Will Data Rule the Wealth World?

It’s almost inconceivable to imagine that anyone who owns a smart phone, tablet or computer is unaware that some of their personal data is being manipulated, bought, sold, traded, stored, sliced, diced and analyzed.

Eric Mellor
Eric Mellor – Wealth Management Specialist, APAC, Temenos

As of June this year, there were 4.4 Billion users of the internet, an 83% increase in the past 5 years. Since 2016 there has been an increase of 90% of data stored on the web. Google currently perform over 40,000 searches every second of every day and 100 Million pictures, mostly avocado toast, are posted to the ‘gram every day.

It’s almost inconceivable to imagine that anyone who owns a smart phone, tablet or computer is unaware that some of their personal data is being manipulated, bought, sold, traded, stored, sliced, diced and analyzed.

From voyeuristic home assistants producing spookily accurate pop up adverts to fake news timeline stories seeking to sway your election votes, data analytics is big business and big bucks.

Short of living off the grid, it seems virtually impossible to escape…if we want our phones to continue to work we will all accept the terms and conditions that accompany each new software update – what real choice do we have?

The naysayers will claim that such passive obedience will be mankind’s ultimate undoing. We are architects of our own downfall, blindly sleepwalking into a Terminator style dystopian future, ruled by machines that we ourselves created.

Whilst this may eventually be the case, I for one am actually fairly disappointed. I own two smartphones, a laptop and a tablet. I watch TV on Netflix, use Twitter, Instagram, Facebook and LinkedIn on a daily basis. I frequently shop online, I have an e-Reader, an Amazon account and no less than three separate internet bank accounts.

Despite me happily handing over almost every single facet of my very existence to the handful of people who own this infrastructure, the last three pop up adverts that appeared in my timeline were seeking an investment in a new villa complex in Bali, a 28 day cruise around the Antarctic and an invitation to test drive a new $400,000 Porsche.

Just to clarify, these adverts have no place being on my timeline. If I’m willing to accept that half the news I may read online is not actually true, you have to at least try to uphold your end of the bargain and target me effectively. Show me things of interest.

Earlier this week I did manage to take a sneak peek at an area where data analytics is likely to perform much better and actually has the capability to improve the lives of both the users of the data and their customers. Perhaps surprisingly, this is in the area of banking, and more specifically, wealth management.

Most core banking systems already contain a wealth of client data but much may be unstructured, not readily accessible and its value, difficult to extract and utilize.

The richness and quality goes far beyond that which we freely provide to social media channels and search engines. Instagram may see us #living our best lives, but our banks are fully aware that our champagne dreams may be grounded in a prosecco reality.

Our age, income, marital status and residential address are just the basics. Our banks know which TV stations we watch, which supermarkets we shop at, the online stores we frequent, how often we travel and where to – they know if we are fiscally disciplined and, if we make student loan repayments, where and what we studied.

The richness of information we freely provide, without fear or suspicion, to our financial institutions makes our airport check-in and avocado toast flat-tops seem insignificant by comparison. Given access to the right data structure, even an averagely skilled data scientist could use this information to build a picture of you more accurate than one you would ever publically reveal.

If this sounds concerning, perhaps it should be although thankfully most financial institutions are very heavily regulated and as at the time of writing, none have been linked to the rigging of elections.

For my part, I’m actually excited by the potential applications that this rich source of data could bring.

It is widely accepted that the next significant growth area in wealth will be the mass affluent market. The challenge with this sector is, as the name suggests, that it is ‘mass.’

As a former bank relationship manager, I know only too well the challenge of trying to stay on top of a portfolio of clients that numbered in the hundreds.

Advanced data analytics has the solution. Imagine a tool that can monitor engagement and predict when a disgruntled customer may be about to close their account or transfer their assets to a competitor. Could a notified RM save this ‘at risk’ relationship with a well-timed call?

Would a customer who recently married be a prospect for an insurance contract? A name change in the core system could easily trigger a notification. What about a customer who recently gave birth? School fees planning? Analysis of spending patterns would easily identify this.

From a marketing perspective, greater insights into your client base would not only enable more effective targeting of adverts but could allow you to create and target bespoke products served in the most efficient and cost effective manner, only to those customers for whom they will appeal.

The key challenge for almost all mass market relationship managers is maintaining frequent content with a large portfolio of customers and a key complaint from many customers – ‘my bank does not understand me’ – with better use of advanced data analytics, they could in fact know you better than anyone else.

In the same way that social media platform serve me ads for things I cannot hope to afford, banks also frequently demonstrate a lack of true knowledge of their customers. I travelled to over 20 countries last year, including trips to Mongolia and Tibet, but my bank suspended my credit card due to suspicious activity…at a gas station in Canada.

If structured correctly, advanced data analytics would allow my bank to provide me with a highly personalized offering, with minimal cost or effort. My internet banking would show me only the services and products I would wish to see and my RM would contact me only when he or she had real value to add to our relationship.

If my financial goals were linked to my investment profile a system could automatically track the performance, factoring in capital additions, withdrawals and regular spending.

A gentle nudge that I’m behind my target each time I charge yet another $10 latte to my credit card or a recommendation to consider my investment progress on the rare occasion when a significant deposit reaches my account could help me to achieve my goals on schedule or perhaps faster.

It’s easy to imagine that many potential applications may be perceived to tilt in the favor of the institution that deploys them – to increase their own revenue, reduce their own costs and enhance overall efficiency and productivity. The potential applications are bounded only by the imagination of the scientists extracting the data and several wealth management technology companies are already able to offer pre-configured applications to make use of such data.

If these solutions can also help clients to achieve their personal wealth management goals, they can easily be positioned as a win/win. And that’s not fake news.

Eric Mellor
Eric Mellor – Wealth Management Specialist, APAC, Temenos