Close Close

Portfolio > Asset Managers

Advisors, Data Is Your Product

Your article was successfully shared with the contacts you provided.

This article was co-written by Richard Jackson and Jake Taylor, managing directors and co-founders of Jackson Analytics. 

The 21st century is all about data. That has big implications for investment managers who need to achieve critical mass in order to be profitable and grow their businesses to sustainable levels.

In today’s digital world, your firm’s marketing data — performance record, attribution and analysis information, even your assets under management — is your product. That data is the evidence that proves that you are able to do what you say you do, and that you have been able to do it consistently, on an absolute or relative basis, over time. Both prospective and existing clients, as well as the consultants that vet and monitor managers for them, rely on that evidence to make hiring decisions, increase investment allocations, recommend a firm to others and remain invested for the long term.

No matter how alpha-laden your track record is, no matter how compelling your investment story may be, if investors cannot find your data, your firm might as well be a tree falling in the forest — no one sees it, no one hears about it and no one even knows it is there.

Data is important in every facet of the investment business. It drives the research that analysts produce. Their judgments drive portfolio managers’ decisions to buy, hold and sell. Data is also important for proper regulatory compliance, sound operations and efficient trading. Finally, data, in the form of performance returns and portfolio analysis, drives marketing, sales and, ultimately, revenues. In today’s digital environment, this type of data is not only a manager’s product; it is a resume.

Challenges to Efficient Data Management

Spending too much on the front end

It is easy to understand why data is so important to money managers, but many continue to put too much emphasis on the front end at the expense of the data that potential asset owners really care about: performance. Over the years, we have asked managers where they get the biggest return on their investment. The nearly unanimous response is “security research and analysis.” Consultant Joel Bruckenstein recently quantified this, reporting that between 50% and 90% of the average firm’s tech budget is spent on investment management tasks like research and rebalancing, InvestmentNews reported in October.

The front end is important, but unless a firm invests in packaging that alpha — and all the supporting analytics and portfolio characteristics that go with it — and distributes it in all the places a prospective client might be looking for it, we are back to the tree-falling-in-theforest scenario.

(Related: AI, Machine Learning Not Ready for Financial Firms)

Spending too much on the middle office

According to results from the 2015 InvestmentNews Adviser Technology Study, firms are shifting their IT spend to focus primarily on client-facing technology and productivity enhancements. Devoting significant portions of IT spend to the middle office may be a great move for mature, profitable firms with a critical mass of AUM under their belts, but it is not going to help smaller firms still hoping to grow their business to a sustainable level.

Why Managers Have a Hard Time Managing Data

With so much at stake, why do most managers struggle to manage and effectively distribute their marketing data? Firms are overwhelmed by the volumes of performance, portfolio and analytical data produced over a 90-day period, especially if they manage multiple investment strategies. Reporting that data through client reviews, marketing collateral, pitch books and DDQs/RFPs/RFIs — and distributing it to over 40 consultant databases — in a timely way that assures the data integrity regulators demand is a labor-intensive task. It is no surprise that putting together things like fact sheets and client reports remain the No. 1 marketing pain point for investment managers, according to an October report by Kurtosys, a financial services data management platform.

Experienced eyes are critical

There is one important element of data management that cannot be eliminated: The human element. It takes trained, experienced professionals to verify, organize and interpret the data.

There are typically over 50 metrics requested by external databases; together, they paint a picture of a portfolio’s characteristics. Each one must be checked for rationality, consistency across time frames and benchmarks, and accuracy. Then a fresh, data-informed narrative needs to be written in order to communicate results in a way that still meets compliance approval standards. That takes experienced eyes and skill, a process that often strains the human resource capacity of many investment firms during their busiest reporting cycles.

Marketing data must be accurate and distributed on time, every time

If there is one thing all database managers agree on, it is this: If an asset manager does not provide consistent data entries into their targetmarket databases, they are not likely to come up in searches. A firm’s marketing data must be reliable, month in and month out. That is the only way consultants and investors build up the trust necessary to contact the management firm for a formal duediligence review.

“Reliable” means data must not only be accurate, it must be consistent, thorough and timely. If a manager is slow to update marketing databases, if there are holes in reporting periods, if past data has been restated due to errors, the firm may be passed over in favor of one of the hundreds of other firms that managed to maintain the integrity of their online footprint over time.

Software solutions often fall short

Many firms turn to software as the solution, but our experience has shown that relying on software alone does not get the job done. Most firms use a variety of legacy systems to calculate portfolio performance, analytics, trading information, AUM and other bits of data they need for client and marketing materials. These systems often do not “talk” to one another, and even the best software system is not able to consolidate and reconcile all that data into one set of normalized outputs. Data might be produced, but it is far from managed in a way that prevents inaccuracies and inconsistencies from creeping into the end result.

Given the enormous task at hand, it is no wonder investment management firms struggle to harness the power of the performance marketing data they produce. The cost of building a secure, controlled in-house SQL database for data warehousing and management is more than most managers can afford. Many small firms take the doit-yourself route or use a public consultant database as the firm’s private vault. Neither are cost-effective solutions. In addition, consultant databases are not designed to serve the needs of managers, and managers should not rely on databases designed for public use to store their proprietary information.

In our experience, a third-party data warehousing and management solution is the best investment a firm can make if it wants to ensure the accuracy and consistency of their data and get it distributed to as many search platforms as possible. Managing data through a professionally developed SQL-based data warehouse that is customized for the needs of each firm frees up internal marketing and sales staff to focus on highlevel, high-payoff tasks, relieves internal IT resources from another system to manage and maintain, and adds an additional level of oversight and verification that keeps regulators satisfied.

(Related: A Big Data Solution for Proactive Compliance Programs)

That last point is especially important. FINRA and the SEC are becoming more assertive about monitoring the data that managers use in marketing presentations and collateral such as fact sheets. They also focus on the narratives that help make the firm’s case about their capabilities and results. Data inconsistencies across time periods and different distribution platforms raise red flags. In the worst case, they can lead to regulatory sanctions and reputational risk. A thirdparty warehousing and management provider helps firms avoid costly mistakes by reconciling data, highlighting errors and maintaining long-term data and document records.

The Must-Have Data

What data is absolutely necessary for potential investors to initiate and maintain a relationship with a firm? At a minimum, investment management firms must provide the following:

  • Performance track record and characteristics
  • Portfolio holdings
  • Assets under management
  • The firm’s business profile
  • Firm and product narratives

So what are the best means and methods of data distribution? The two most powerful data distribution platforms available to managers are search databases serving their target markets and firm/fund fact sheets.

Here are the most effective data distribution platforms investment management firms should be using:

  • Consultant and online databases
  • Fact sheets
  • Competitive analyses
  • Pitch books
  • Due diligence documents: RFPs/RFIs/DDQs
  • Websites

The firm that understands that their data is their product and uses every available means of data distribution is a firm guaranteed to grow AUM regardless of market conditions. Successful firms invest in professional best practices that put the management and distribution of their data at the top of their marketing priority list.

Professional data management warehousing has become an essential need for asset managers — especially since regulators have become hyperfocused on the accuracy and integrity of the data that firms make available through their marketing communications and collateral. A secure, webbased portal that captures, verifies and stores all the marketing data sets that a firm generates makes every element of distribution reliable. Tracking logs of data vault activity has become a necessary component of marketing data management, both to document the source of every data point and to track how these data points are accessed and updated over time. Investing in a professional data management service can solve the challenge of managing and distributing investment marketing data, keep compliance happy and help firms grow their AUM to profitable and sustainable levels.

— Read Envestnet Tamarac Adds Tool for Full Asset, Liabilities Reporting on ThinkAdvisor’s TechCenter.  


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.