What is bad data really costing you?
The answer is often more than you think. But, scant comfort though it may be, your firm is not alone.
Inaccurate, incomplete and inconsistent data appear to be rife across the wealth management sector. And industry trends mean the issue will potentially get worse.
Today’s wealth management businesses are deluged with unprecedented data volumes – a torrent that is growing by the moment. A relatively small number of problems will therefore have enormous impact.
Say a wealth manager processes 500,000 transactions per month. Were it to have a less than 1% data error rate (an impressive achievement in what tend to be manual-heavy data processing environments), that still translates into a massive number of potential issues. Finding and resolving those in a timely manner presents a monumental challenge.
Yet, as we highlighted in a previous blog
, the full extent of an organisation’s data weaknesses typically goes undiscovered and underreported, with firms unaware – and unable to measure – the true price their business is paying.
Data pain points
So what are the biggest data-related pain points afflicting wealth managers?
Not all data problems cost the same.
A 2015 Dun & Bradstreet paper
on the ROI of quality data calculated that preventing data issues cost $1 per record. Identifying and resolving poor data took $10 per record, while correcting a data error after an event cost $100. The exact numbers in this cost hierarchy may have changed in the interim. The principle holds as true.
Getting data quality right from the outset evidently makes sense. It is rarely what happens.
Instead, wealth managers must often devote significant resources to investigating where their data errors occur and fixing them. Organisations will have to employ more people than they would otherwise need to rectify the data faults. Lack of trust in the data may force wealth managers to run duplicate systems and/or undertake excessive checking.
A reliance on inefficient resolution and correction processes also means firms will lack the scalability to grow profitably.
Alongside the direct cost of those employee hours is an opportunity cost from the wasted time and lost operational capacity, resources that could have been spent on more value-adding, revenue-generating activities.
Take a common situation: a firm discovers an income processing problem after it has issued all its tax packs to clients. The figures must be restated. In addition to the labour time involved, reissuing the report packs will incur printing and postage costs if done physically. Clients may need to be compensated.
Missing or incorrectly-applied investment restrictions are another example. A client may stipulate they don’t want to invest in tobacco or fossil fuel companies, but because the restriction data point wasn’t set up correctly they find unsuitable securities in their portfolio. The client may need to be recompensed and/or have their management fees refunded. And the stock will have to be sold, incurring additional costs.
- Reputational damage and lost revenue
Data errors undermine hard-won corporate reputations. Mistakes dent clients’ trust in and satisfaction with the service. Once their faith has been rocked, it is hard to restore. They may opt to entrust any additional investment sums to a rival wealth manager, hitting future revenue possibilities. Worse, the client may withdraw their business entirely.
The strongest marketing resource wealth management firms have is client advocacy. Timely, trustworthy data used to support responsive interactions help strengthen client loyalty, and encourage positive reviews and recommendations. Service niggles can quickly have the opposite effect. In an age of social media and online reviews, perceptions of lax controls, risk and incompetence can spread fast and wide. Once a firm’s reputation has been tarnished, it will struggle to retain existing clients and attract new ones.
Employees want their work to be interesting and fulfilling. Being able to rely on a clean, accurate, golden source of data allows staff to focus on converting prospects to customers, servicing client needs, optimising portfolios and a host of other value-adding activities. By contrast, spending their days checking data, remediating errors and mollifying irate customers is unlikely to foster a happy, dynamic work environment that maximises profitability.
Disenchanted staff will be less productive. Turnover may be higher, requiring further expenditure to recruit and train replacements. Inexperienced new employees in turn will make more mistakes and be less able to spot where data errors have crept in.
Compliance risks will proliferate too … as our next blog will explore.
But poor-quality data, and the problems that result, do not have to be an inevitable cost of doing business. With the right tools, and effective training, wealth managers can move from expensive remediation to data problem prevention. The business gains will be transformational.
Download our white paper
to learn more about how bad data could be costing your firm, the benefits of quality data and the solution for it.