For those who have not heard, Big Data refers to the ability to analyze or “crunch” significant volumes of data to better understand trends. Evaluating Big Data can be confusing and potentially overwhelming, especially if your firm isn’t very good at analyzing “small” data. Let’s face it: Some advisors love reviewing reports, and others would prefer to focus on other tasks. Let’s review some small-data items for all advisors to consider, and identify potential Big Data opportunities.
Do you know how much growth your firm needs in new assets to remain even in your total assets under management? Each year, your clients continually withdraw funds, much of which is predictable. For example, how much will your clients withdraw in 2014 for required minimum distributions from retirement accounts, periodic ACH transactions and check disbursements?
An easy place to start is to review what happened in 2013 and then adjust the total number based on your expectations for 2014. If you see that approximately $10 million is expected to be withdrawn in 2014, then you know how much you need to grow in order to maintain your total assets under management.
Another small-data item to consider involves a number of data points for your existing client base. What is the average and median age of your client base? How many of your clients are in the accumulation phase of their life? How many have children going to college in the next five years? What is your typical share of wallet for each client relationship? Your CRM system is probably the best place to start. There might be ad hoc reports already available, or you could build a customized report. If you are not tracking some of these data points today (e.g., age of client’s children), then it is time to start a small project to gather this information.