Capital markets firms are under tremendous pressure to make the most judicious business and investment decisions possible, and the effectiveness of these decisions mainly depends on the data underpinning them.
Recent research commissioned by MarkLogic, a software business, finds that the financial services industry continues to struggle with general data and information management. At the same time, many firms are trying to develop and implement a single data platform to enhance their business and investment decision-making.
At midyear, WatersTechnology, a financial market technology information provider, surveyed 104 investment practitioners and IT staff at investment banks, traditional asset managers and broker-dealers spread evenly across North America, Europe and Asia/Pacific.
The survey asked how the firms used data to generate differentiated insights and empower better and faster decision-making in pursuit of alpha. Researchers also wanted to determine limitations in current data management systems and approaches that held back capital markets firms in achieving desired outcomes.
Some two-thirds of capital markets firms in the survey said they struggled with research data that was poorly managed or difficult to access. Sixty-four percent said their organization’s research data was stored in too many disparate systems or locations across the enterprise.
Sixty-six percent of respondents complained that they were unable to access all research information in one place, with 21% saying this negatively affected performance and investment decisions.
Seven in 10 survey participants said they had insufficient tools, or none at all, to create timely, personalized, authoritative research for clients, diminishing the client experience.
The report noted that if firms’ investment analysts are unable to access data they need to inform their decisions, then “at best, their conclusions might be suboptimal and, at worst, wrong.”
Having data immediately available is critical to making the best possible investment decisions, Giles Nelson, chief technology officer for financial services at MarkLogic, said in a statement.
“It’s also important to regulators that firms understand how a conclusion was derived, which means they’re able to track data lineage to justify decisions — not only to regulators but to investors or other key stakeholders.”
Nelson said doing this was about showing that firms have a process in place and data to support decisions.
Half of the firms surveyed said they were considering a single data hub to help them streamline processes around storing and curating investment research. MarkLogic predicted that a majority of financial services firms would be using a hub model in coming years.
Although none of the survey respondents said they already had developed a single investment research hub, 56% indicated they were considering one.
The survey found that the biggest hurdle to achieving approval for investment in new technologies was the business case. However, 69% of firms expected that building the case for investment in a data hub around improved operational efficiencies would help them secure the funds.
Forty-nine percent said they would argue that improved investment decisions would enable them to achieve alpha. Forty-four percent said the best business case was improved firm-wide collaboration and new business opportunities, and 40% said it was improved research quality.