What You Need to Know
- With so much data at our fingertips, advisory firm leaders can become dependent on it.
- Data can help increase productivity. When processes are tracked, a leader can see trouble spots in systems faster...
- Data doesn’t tell you how your business could change if you could close clients faster.
We live in a big data world.
Advancements in analytics help advisory firm leaders make faster, more informed decisions about what to prioritize and where to focus. The introduction of “business intelligence” has made it easy to spot patterns, trends and client behaviors. It gives advisors a snapshot of what their clients are and aren’t doing.
Big data is good — except when it isn’t.
With so much data at our fingertips, advisory firm leaders can become dependent on it. For all the good it can do to show an advisor what has happened or is happening in their business, it cannot by itself create true innovation.
If you understand the limitations of data, you can use it to your benefit. Here, we’ll look at the pros and cons of being a data-driven advisory firm owner.
Pros of Data-Driven Advisory Firms
When a firm has good data, it can find easier ways to improve both its client and advisor experience. That is, you can improve how you serve clients and in doing so improve how an advisor feels serving a client. It will measure client satisfaction and employee satisfaction.
On the client side, capturing data on how they interact with their advisor or advisor-provided technology solutions can show what clients really want, what they’re not getting and what problems they’re having that you need to solve.
For employees, data can help increase productivity. When processes are being tracked, a leader can more readily spot issues in systems and processes that break down. If those processes are corrected, a firm can quickly expand capacity as it gets everyone following the same workflows and taking consistent actions.
As employee productivity increases and the client experience becomes smoother, increased revenue and decreased expenses are ultimately the result. As your firm enters this new phase of growth, it can achieve a competitive advantage over other firms struggling to spot their weak areas. In addition, your firm can onboard clients faster, serve them better and keep them happier over the long term.
The results are simply good business outcomes. Employees enjoy their job, so turnover is low; and clients enjoy their service, so retention is high.
With potential results like that, where could data possibly steer you wrong? It’s not so hard to see when you know where to look.
Cons of Data-Driven Advisory Firms
Data tells us only about the past or the current moment. On its own, it cannot innovate or create change in an advisory firm. It can fix only what is wrong in the moment.
This repetitive cycle — looking at the data, fixing what’s wrong, looking at the data, fixing what’s wrong — doesn’t tell us where the industry might be changing or where a firm may need a deeper strategy to enhance growth in the future.
In other words, data is data. The creativity found in being blissfully ignorant of data often fuels some of the most innovative (and perhaps disruptive) advances in industries. It also allows us to think outside what is happening today and find new ways to evolve as a firm.
Another con is that when data is judged as positive, it’s easy for an advisory firm to become complacent. A firm that is 100% data-driven can easily take the “if it ain’t broke, don’t fix it” mentality that has caused many businesses to miss out on the innovation and disruption that ultimately displaces them.