Bring Big Data Power to Your Client Accounts

By Martin Dickau, CTO, ByAllAccounts on Tuesday, July 10th, 2012

What does Big Data have to do with the asset harvesting opportunities financial account aggregation provides? Should independent advisors be listening to the buzz?

Big Data really refers to collections of information so large and complex that they are difficult to analyze using traditional means. 

The problem used to exist largely in the scientific space, then in intelligence gathering, and now people are asking me how it applies to the business arena.

To me, the financial account information space is a microcosm of the Big Data problem. Advisors often have to grapple with the three dimensions of complexity -- often called the three Vs -- that make Big Data so difficult to work with.

1.) Volume: the sheer amount of data

2.) Velocity: how quickly the data is produced and how quickly it must be acted on

3.) Variety: the different purposes for which data is produced, the different ways that data is structured and delivered, and the different content details provided by each producer

All businesses struggle to sift through this huge mass of rapidly changing, completely non-standardized data to glean key information – “business intelligence” – upon which to make decisions.

Financial Services: A Big Data Microcosm

When financial services firms come to us seeking a financial account aggregation solution, I see them struggling with the very same three Vs.

Volume is usually the most obvious factor. Even those firms not experiencing a dramatic increase in the number of customers they serve face a demand to work with more accounts, more holdings, more transactions and more external sources of information.

Meanwhile, market instability, scandals and increased regulation are promoting consolidation throughout the industry, forcing advisors to serve more assets.  Traditional methods of manual collection simply do not scale in an economically feasible way.

Velocity manifests itself as a time crunch.  Account information used to be made available via annual statement, then quarterly, then monthly.  Now that daily reporting is the norm, real-time information may soon become ubiquitous instead of wishful thinking. 

The wave of up-to-date information has brought with it customer expectations that service will be delivered on that information at the same pace and that performance analysis, cash management, trade reconciliation and fraud detection will proceed at real time. At this point, successful financial service providers essentially have to deliver next-morning turnaround.

Variety is the least appreciated dimension of the problem, and it now appears in two ways. 

First, there is no comprehensive financial information standard. Banks, trust companies, brokerages, clearing firms, mutual fund companies, hedge funds, private equity funds, insurance companies, retirement plans and others all report different degrees of detail and on different schedules, structured and delivered in different ways.

 I think of it as each speaking a different language and the financial services firm trying to understand what everyone is saying, only to be stymied when running into a new language or a strange dialect.

Second, there is no universal set of tools to mine and understand all this data across all the various formats. A recent survey ByAllAccounts ran showed the average advisor uses 5 different applications to work with financial account data (click here to download an executive summary of the results).

I find most of the people I talk to think an account aggregation solution is a way to address the Volume and Velocity challenges.  Manual data gathering is too expensive, does not scale, and is slow and error-prone.  Automation is a better alternative on all fronts, and financial account aggregation technology is a good way to automate.

Relatively few fully appreciate the Variety they face or what an intelligent aggregation system can do to help. 

The problem is usually understood at a superficial level as “format” compatibility: can information be restructured from the physical format available from the provider into the physical format required by the platform? 

To continue my linguistic analogy, that approach is akin to translating from one language to another word-for-word, with no understanding of meaning. 

A classic example is a computer-based English-to-Russian-to-English translation of the saying, “The spirit is willing, but the flesh is weak.”

When run through the translators, it came out as, “The vodka is strong, but the meat is rotten.

The second is word-for-word equivalent, but not a proper translation at all.

To truly help cope with the Variety problem, an aggregation system must capture the meaning of the information and restate it in terms that carry across portfolio management, trust accounting, reconciliation, trade monitoring, performance reporting, customer relationship management or any other language or dialect the financial services industry requires or invents.

Yes, financial account aggregation is contributing to the Big Data problem by bringing more data into the financial services enterprise more quickly than ever before. But at the same time, it plays a key role in providing the tools advisors can use to grapple with that very problem. 

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