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Asset Managers Drowning in Data: Northern Trust

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Asset managers are awash in new data, but few are reaping tangible benefits from their data, according to research findings released this week by Northern Trust.

Only 13% of asset management executives in a new survey said they successfully captured the full value from all of their data. Forty-four percent said they did so fairly well, and 41% somewhat well.

Most asset managers in the survey said the benefits they derived from data were broadly in sync with their most important goals: improving investment decisions, managing risks and modeling or otherwise assessing risks.

As well, they said, growing regulatory demands and the need to improve client satisfaction were motivating them to seek new data.

However, 28% of respondents reported that data inundation made it hard to determine what was useful.

Thirty-six percent of respondents complained that data required significant scrubbing or processing, and 29% said data were presented in noncompatible formats.

Northern Trust said these barriers left most asset management executives with strong reservations about the reliability and utility of their data.

“This survey confirmed for us what we recognize as some of our clients’ biggest challenges,” Pete Cherecwich, Northern Trust’s Americas head of corporate and institutional service, said in a statement.

“Whether they are looking for ways to manage their investment decisions, monitor their risks or improve their reporting, they need to extract more value from their data to gain actionable insights.”

The Economist Intelligence Unit in September polled some 200 American and European asset management and insurance executives involved in decisions regarding data sourcing, management and strategy. About half of respondents worked for managers with more than $5 billion in assets.

Nimble Strategy, Strong Leadership

Northern Trust said that in order to handle data successfully, asset managers had to continually modify their approaches to data and analytics, and ensure these were aligned with the needs of the business.

The EIU survey showed that asset managers in firms that successfully capture value from data more often also said they had what they needed to support decision making. 

Not only that, executives who reported that their firm captured value from data “entirely” or “fairly well” were twice as likely as other respondents to say data strategy was “mostly” or “entirely” flexible.

Flexibility also correlated with the frequency with which investments in data were reviewed relative to strategic goals, according to the findings.

Seventy-one percent of those who said they assessed performance monthly reported their data strategies were mostly or entirely flexible, compared with 53% who said they measured success annually.

Northern Trust said the survey showed the importance of nimble data management combined with strong executive leadership to prioritize goals.

The findings, it said, suggested that asset management firms should have a centralized leadership structure with an individual or team at the helm with a holistic overview of the organization and a robust collaborative spirit, to ensure data are managed effectively on an enterprise-wide basis.

The industry, however, has a long way to go in this regard. The EIU poll found that nearly one in five organizations lacked a central leader of their data strategy.

Northern Trust said for data to be useful, they must be both accurate and actionable. It offered this “best practice” solution for data management:

  • Aggregation: Capturing and centralizing data, and providing a presentation and data-delivery layer
  • Normalization: Consistently translating and formatting data from each source
  • Verification: Validating received data’s accuracy through reconciliations, overriding data where necessary, running quality checks and resolving discrepancies
  • Integration: Integrating systems, business processes and data-delivery formats

— Check out How Tech-Enhanced Speech Will Change Wealth Management on ThinkAdvisor.