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Wealth Managers And The Role Of Data In A Post-Truth World

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Living in the Information Age, we often take it as given that data is supreme. This is particularly true in the wealth management community, where information serves as a crucial guide for investment decision-making. Yet last year, when insight failed to generate accurate predictions in multiple high-profile political battles, data appeared to lose its persuasive power.

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Perhaps as a result of these failures, many high net worth individuals (HNWIs) are questioning the data they receive regarding their exposure to different geographies, currencies, and sectors. To understand their true risk exposure and market position they demand not only the insight historically provided by their wealth managers, but also the raw data to draw their own conclusions. Advisors can have a real impact on client behavior if the information they provide is clearly geared towards minimizing losses.

Against such context, we are left to question whether the existing frameworks for understanding and communicating risk in the advisory relationship are sufficient. To address this issue, FactSet and Scorpio Partnership recently surveyed 1,123 HNWIs from Australia, Canada, Hong Kong, Singapore, Switzerland, the United Kingdom, and the United States to determine where current practices need to evolve to best serve the wealth industry and improve its resilience in the face of uncertainty. We'll be discussing the survey results and what they mean for the future of wealth management next week in a live webcast.

Based on our findings, here are some of the ways the wealth management industry can improve its resilience to uncertainty and build better relationships with its target audience.

  1. Deploy Digital Solutions to Stimulate Investment Execution
    With no shortage of financial technology to choose from, wealth advisors should be leveraging tools that allow them to stress test their investment ideas and communicate them to clients. Digital solutions can lighten advisors’ compliance and administrative workloads so they can prioritize client relationship management.
  2. Use Technology to Complement KYC Efforts
    Human advisors display an unrivaled understanding of investor aspirations, yet they are also prone to errors of judgment. By harnessing big data, web analytics, and social media, advisors can enhance their understanding of clients.
  3. Customize Content to Demographic Demands
    As discussed in last year’s findings, generational attitudes towards communication, risk, and regulation in wealth management vary significantly. This year’s findings reinforced that finding. Baby boomers turn to their wealth managers first to understand the market outlook. Millennials seek access to a broad range of insights; however, they are particularly eager for detailed guidance on risk mitigation. For more impact, advisors need to tailor content to different audiences.
  4. Provide Full Visibility of Portfolio Composition
    Our survey showed that many HNWIs believe their exposure to certain geographies, sectors, or currencies could leave their portfolios vulnerable to change. Younger clients are most concerned about the lack of clarity into their complete investment positions. Advisors need to improve transparency to satisfy investor needs.
  5. Proactively Initiate Discussions of Investor Concerns
    HNWIs will often inform their advisors that their appetite for risk has changed. Advisors therefore, need to lead review discussions that tune into fears as well as hopes.

While these observations form a basis for the type of change that could positively influence the advisor/client relationship, respondents had much more to say on the state of the wealth managements industry. Learn more about those views in our upcoming live webcast: What HNWIs Demand In A New Era Of Volatility.

Article by Greg King, CFA - FactSet

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