Don’t Let Your Data Limit Your Investment Universe

By Martin Dickau, CTO, ByAllAccounts on Thursday, December 27th, 2012

Working with structured data feeds is a dream. But in an industry that needs to be increasingly open to alternative asset classes and retail-level accounts, turning unstructured data into a structured back-office-friendly format is the Holy Grail.

Competition for assets has fueled an enormous proliferation of innovative investment vehicles, many of them built to meet specific advisor needs. That’s a good thing because it gives all market participants more options.

In an ideal world, all of the custodians, clearing firms, asset managers, fund accountants and other keepers of financial information would collect and process data to the same degree of detail, using the same set of terms and classifications, in the same well-structured physical format, on the same frequency, and via one delivery mechanism.

And just as importantly, in that ideal world, all financial applications and platforms that you use to process that data could get whatever information they needed, at any level of detail, classified according to their needs, in a physical structure they could read, and available via a mechanism they could access directly and automatically.

By now you know where I am going here: we do not live in that ideal world.

Faced with a flood of unstructured information, most firms decide to artificially limit the instruments they work with to those that deliver their data in a format their in-house systems and partners will support.

Others refuse to let their data dictate their investment universe, searching instead for intermediary data aggregation systems that can adapt to whatever their partners provide and whatever their own applications need to consume.

An open or closed approach for your back office

It’s a matter of choice, but I think it really revolves around whether your firm has a fundamentally open or closed outlook and architecture.

An open approach can evolve organically to match your business needs, your clients’ investment goals, the array of vehicles available and the ever-changing technological state of the art.

A closed approach may be extendible, but every addition to the platform is essentially a special case. Multiply special cases, and you’re not looking at a platform any more, but a collection of exceptions patched more or less artfully — and robustly — together.

Aggregation technologies can adopt either approach, but at ByAllAccounts we chose a platform-independent model.

Our data aggregation process uses artificial intelligence to gather account, investment and transaction data from any of the delivery mechanisms that the industry currently supports or has supported in the past. We’ll be able to expand the data services platform to keep up with whatever new systems emerge in the future.

This means that if you need to add a manager who reports in a structured format to your platform, you’re covered. And if you want to add an account that only reports via Web page, PDF or spreadsheet, you’re covered.

To be successful, the process needs to work at two key levels:

   1. You have to be able to receive all the information you need.

   2. You have to deliver it to all of your applications in a format they can use.

The first part entails being open to data however it is distributed, whether that’s on the Web page or a direct structured transfer. You already know how complex it can be to build that aggregated data pipeline.

Given the proliferation of business models and technology configurations in the industry, the second part is actually more complex.

Your business may not necessarily need to feed trust accounting, trade reconciliation, portfolio management, cash sweeps, compliance monitoring and CRM systems, but across our client universe, we need to support them all, so we do.

Even two software applications that may deliver superficially similar output – a client statement, for example — structure their data in vastly different ways to get to that point.

Whatever the components of your technology platform, you need a true application-agnostic solution.

Widening your horizons

As you look ahead to 2013 and your business goals for the New Year, this is an opportunity to take stock of your technology and data needs:

  •     Do you want to scale your business?

  •     Do you want to follow your clients’ needs across asset classes?

  •     Will your use of alternative investments increase?

  •     Will you work more with annuities and insurance products?

  •     How many hours does it already take to manually collect and report on your clients’ investments?

  •     Can you afford to add full-time resources to support operations?

Too often, advisors spend time and effort integrating all their data feeds, only to find that the final product still requires an additional layer of manual interpretation and manipulation in order to bring into their software.

That manual manipulation may seem trivial if only a few accounts or intermediaries require extra attention, but remember, exceptions don’t multiply well.

In a manual world, to scale into an exception-rich space — alternative investments, for example, or employer-sponsored retirement planning — you have to increase the resources you allocate to the exceptions on a one-to-one basis.

But advisors who close their platform to these investments because they assume there’s no easy way to bring in the data are cheating themselves out of both the growth they want and the efficiencies that naturally follow.

A full 30% of the more than 4,000 data providers we work with simply do not deliver structured data. They require either manual import or artificial intelligence like ours to integrate into an investment management data feed.

Some of these providers are hedge funds. Others are the biggest retirement plan administrators in the world, too big to ignore.

Personally, I think advisors who support instruments that are either too exotic or too mundane to show up in the traditional structured feed have a real competitive edge.

We’re not about to take that edge away from you just because the data arrives in an exotic or outmoded way.

You May Also Be Interested In…

Our Data Aggregation Advantage  (Complimentary EBook)

Alternative Investments Still Need Traditional Reporting (Blog post by Cynthia Stephens, VP of Marketing, ByAllAccounts)

Fast, Efficient Reconciliation (Complimentary Whitepaper)

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