17 September 2014

In recent years, the pursuit of competitive advantage among wealth management companies has seen a shift in focus from good record keeping to the analysis and interpretation of those records to better understand and serve the customer. In today’s financial services landscape, achieving high integrity and highly secure record administration is a given, not a point of differentiation in the marketplace.

Sustainable competitive advantage in the wealth management industry can no longer be achieved solely through the development of new products. Innovation can be quickly emulated by competitors and offering a cheaper product, if price reductions aren’t supported by administrative efficiencies, is simply a race to the bottom.

Increasingly, wealth management businesses are concluding that their best chance for achieving sustainable competitive advantage lies in knowing their customers better. Deep, intimate customer knowledge enables a company to develop and deliver targeted, personalised and compelling offers that provide customers what they want, when they want it. This in turn enhances profitability through multi product holdings and improved customer retention. In this way, a company can respond to the needs of customers and partner with them throughout their entire lives, maximising the value of these relationships over time.

Data and analytics are fundamental to this customer-centric approach. Consequently, more and more businesses are looking to bring together their customer data in a way that allows the information to be easily analysed, actioned and monetised.
While advances in technology have meant it is no longer prohibitively costly to store, manage and examine large amounts of data, there remain a number of barriers to businesses effectively pooling and analysing their customer information.

Most financial services organisations are managing a complex web of registry systems, with the result that customer data is spread across a number of different databases. As a result, that data is fragmented and difficult to share and analyse.

Further, within each registry system, data is typically held within an online transaction processing (OLTP) database. These databases feature a highly normalised schema designed to optimise transaction processing, not data analysis. Due to the highly complex nature of the OLTP schema, the data within it is extremely difficult to search and interpret.

In recognition of the increasing importance of data and analytics in customer-centric service delivery, leading software providers are enabling advanced wealth management platforms to be brought to market that are successfully tackling these issues.

Within these next generation applications, the emphasis is upon simplification, consolidation and reorganisation. They allow companies to unify multiple business lines – across superannuation, retail investments, life insurance and wrap – within one comprehensive registry system, assembling customer information in one easily accessible location.

Further, these wealth management applications take the large pool of data held in a registry system’s OLTP database and reorganise it into an Operational Data Store (ODS). The ODS adopts a business intelligence schema that is specifically designed to facilitate enquiry and analysis. The ODS simplifies transactional data and combines it with additional information, such as workflow and business processing data.

The ODS vastly improves the ability of businesses to interrogate and utilise customer data held in their own registry system. In addition, it delivers the ability to easily extract data from a registry system and combine it with other business intelligence systems or an enterprise data warehouse that encompasses the entirety of their business operations. In this way, companies can compare their own data with market and industry data, enabling sophisticated analysis that can reliably identify industry and consumer trends. In the not too distant future, systems will be capable of reacting in real time and in an intelligent way on the basis of customer activity, demographic trends other observed behaviours. This stands to transform the ability of businesses to respond quickly and effectively to their customers’ needs.

Comprehensive registry systems that include an ODS represent a key tool for businesses seeking to unlock the potential of their customer information. By optimising a company’s capacity to pool, share, search, analyse and interpret customer data, these applications facilitate the development of a much more detailed picture of the customers’ needs, wants and expectations. It is this deeper, more intimate customer knowledge that will afford businesses the leading edge in the pursuit of sustainable, competitive advantage.