Finding the Cure for Fragmented Data in Legacy Wealth Management Systems

“One person’s data is another person’s noise.”
― K.C. Cole, American science writer, author, and professor

The number of applications used by a typical wealth management firm can be staggering.

According to a 2019 study, small businesses use an average of 40 different apps. This number grows  to over 200 for enterprise-sized companies and can include many with overlapping and duplicative functionality due to merger and acquisitions that pile layer upon layer of tech debt.

The irony is that even as cloud-based software has become more powerful and data storage ever cheaper, the more apps an organization uses, the more difficult it becomes to make data-driven decisions.  How can executives keep an eye on their company’s sales, marketing, finance, customer service, SEO, IT, to name a few, since these fragmented sources of data are unable to provide the complete picture.

As IBM’s Big Data and Analytics Hub stressed:

“What we’ve learned is that many of the most common challenges associated with big data aren’t really analytics problems. In many cases, these problems are fundamental, even traditional, information integration problems.”

What this all means is that all the data in the world won’t lead to useful insights if it can’t be brought together into the same system for analysis. Every wealth management firm, large and small, needs to think about the data they produce more holistically starting now.

As part of our work to help our enterprise wealth management clients get the most benefit from their data assets, Ezra Group has partnered with Xtiva Financial Systems to produce a series of webinars. Our goal is to bring leading industry experts in data strategy, data architecture and systems implementation to share their experiences and best practices.

The third webinar in the series was called The Last Mile: Data-Powered Client Experience in Wealth Management and included panelist Penny Phillips, President & Co-Founder of Journey Strategic Wealth. She discussed tips for dealing with legacy systems and integrations, the challenge that wealth management firms have in collecting the right data and the powerful combination of demographic and psychographic data to drive sales and marketing efforts.

In case you missed webinar #3, you can click here to unlock your access to the full recording.

The Fragmented Data of Legacy Wealth Management Systems

Financial Advisors in the broker-dealer channel have to deal with legacy systems that still code clients by product or service and suffer from fragmented data — how are they supposed to provide holistic advice?
— Penny Phillips

According to a recent State of the Customer Journey report, 47% of firms say that data silos are their biggest problem when it comes to gaining insights about clients and prospects.  Another 20% admitted that they don’t even have the knowledge or capacity to extract insights from the data they do have!

Both of these issues could be solved by prioritizing effective data management and breaking silos down to allow disparate data sources to be combined and analyzed throughout the organization.

Companies that have been around for decades and have grown through multiple acquisitions can develop a “silo mentality” where departments and teams working in isolation from each other becomes the norm. No one realizes how they are being impacted by the lack of inter-company communication.

There are many types of silos and stories about why they were built, some intentional and some not! This includes geographic silos where a company has offices in different states or even different countries.  Combined with technology barriers of different systems holding client data often in different formats and it’s not hard to see why there is no single source of truth across an organization. (See One Platform To Rule Them All: How Consolidation Transforms Wealth Management Systems)

An overview of internal processes within each organization, coupled with effective communication across separate departments and a central point of control are as vital to each individual organization as they are to entire business sectors.

Phillips shared that while financial services firms have more data about their customers than any other industry, only use 0.5% are using it.  This means almost nothing is reaching individual advisors.

A big reason behind this is because large broker-dealers were built to sell investment products, not to provide financial planning or holistic wealth management, Philips explained. Meanwhile, financial advisors still struggle to understand data on their own books of business. 

Psychographic + Demographic Data

Successful wealth management firms combine demographic and psychographic data to target the clients they want to have for the next 5 years.
— Penny Phillips

It’s not about your current clients or the current data you’re collecting and acting on, Phillips insisted, it’s about the clients you want to have for the next five years and the data you will need to identify them and convince them that they should trust you with their financial lives.

While every firm uses some kind of demographic data (i.e., age, gender, occupation), very few are leveraging the powerful combination of demographic and psychographic data, Phillips noted. 

Psychographic data is data about a person’s values, attitudes, interests and personality traits that is used to build a profile of how an individual views the world, the things that interest them and what triggers motivate them to action.

Alongside demographic data, psychographics attempts to capture the psychological state or some particular combination of activities, interests and opinions (AIOs), that imply a proclivity to an advertisement, opinion or product according to a report by cybersecurity firm Upguard.

The goal of psychographic research is to create a more complete profile of the target audience to improve conversion rates, personalize messaging, ask the right questions, swing elections or change opinions.

You can’t complete an ideal client profile exercise without psychographic data, Phillips insisted. This includes investors’ opinions, what motivates them to select an advisor, their relationship with money or their family history, and since this kind information lies below the surface, it requires more effort to gather. 

Social media companies were some of the first to collect psychographic data and leverage artificial intelligence to monetize it. This is why after you run a quick Google search for running shoes, you get barraged with ads for them almost everywhere you go, Phillips noted. Companies have become so sophisticated in how they use how psychographic data, it can seem a bit creepy at times, she said. (See “Don’t Get Creepy”: Privacy in Wealth Management & Emerging Technology Trends)

Northwestern Mutual is a great example they ran a very successful marketing campaign called, “You Dream It, We’ll Help You Live It”, Phillips explained.  The Milwaukee, WI-based insurance giant targeted a younger demographic that were not concerned the same issues as Baby Boomers. Their commercials and online ads targeting single mothers with careers, younger people who wanted to take a year off before starting work and traveling.

This was a terrific example of a firm using psychographic data to inform their marketing strategy for insurance products, which are not on the cutting edge of innovation in financial services, and successfully reach a younger demographic, Phillips stated.

How to Beat Robinhood

50% of all investment accounts opened in the last 5 years were on Robinhood. Financial advisors aren’t going to win on speed or technology, but by providing advice that compliments their clients’ active portfolios.
— Penny Phillips

With a potential market valuation of $35 billion from their upcoming IPO, Robinhood is poised to cash in on their rise to dominance of the mobile trading market.  But what are consequences of millions of Millennials, Gen Z and other investors being influenced by the AI that encourages active trading?

A new study from the Journal of Economic Behavior & Organization looked at why Robinhood is so popular with younger investors and what’s driving the often-toxic interaction between social media and investor behavior.

As described in MarketWatch:

The researchers designed experiments in which 18- to 24-year-olds were given the choice between a “safe” investment outcome and a chance to win the lottery. Sometimes they made their choices alone, and sometimes while being observed by their peers. They were far more likely to choose the risky lottery option when they knew they were being watched.

The study … helps to explain some of the riskier behaviors that have been associated with the online trading. A spectacular example is the short-squeezes that Robinhood investors played a big part in helping to engineer earlier this year in stocks such as AMC Entertainment Holdings and GameStop.

I disagree with the last sentence, though.  The short squeezes led by the Reddit forum r/WallStreetBets weren’t driven by peer pressure, per se. It was a well-researched and well-planned scheme to generate short-term trading profits.  This is not the same as a group of twenty-somethings buying lottery tickets to impress their friends. (See Reddit Targets Robinhood And The GameStop Débâcle)
Phillips explained that wealth management firms should be digging deeper into their clients’ social media data to learn more about their interactions with Robinhood and other online trading apps. This includes when they opened their account9s), what relationship their social media posts had to the timing of the account opening, their age range, what they purchased, etc. This kind of data would provide a lot of value for advisors and help them to  better attract and serve clients, Phillips stated.

Why Wealthtech Integrations Suck

Vendors promise their integrations are seamless, but they’re often just one website linking to another. Breakaway advisors complain when they leave their broker-dealer & realize their data feeds aren’t always reliable.
— Penny Phillips

There’s a joke I like to make to our enterprise wealth clients when they ask about integrations. I say that if vendor promises about how well their integrations worked were even half true, every technology consultant would be out of business!wealth management legacy systems

The reason, of course, is because vendor integrations rarely work as advertised and always have suffer from one or more technical problems.  These include:

  • Poor documentation – This makes it difficult for outside developers to implement them and requires the vendor’s staff to help, often at an additional cost.
  • Over-promising – The sales person assured the client that all the data they needed could be accessed via the pre-built integrations, but they’re actually just single sign on (SSO).
  • Communication of Updates – Developers are notoriously bad at documenting their work. They’re even worse at communicating to their clients and partners about code changes that might break their integrations! These incidents happen too often (in a perfect world when they should never happen at all) and when they do it causes a chain reaction of frantic calls, emails and slack messages as everyone tries to troubleshoot why their connections and push software updates to fix the problem. The end result is loss of confidence and crashing client satisfaction scores.
  • Bugs – The integration works and has the right data, but it crashes constantly or sends the wrong data under certain edge conditions. Vendors that treat quality assurance as an afterthought or skip it entirely because their integrations aren’t officially supported suffer the worst from this.

Cloud-based platforms have made integrations easier to manage but also easier to deploy, which can encourage a laissez faire attitude from vendors.  We strongly advise our wealthtech and wealth management clients to trust but verify every software integration that connects to any of their systems.  This should include documenting every interface, the inputs and outputs, when it was implemented and tested and the names and contact information for the key technical support people and escalation procedures for each vendor.

In case you missed webinar #3, you can click here to unlock your access to the full recording.

Featured Image: RetroRocket 



The Wealth Tech Today blog is published by Craig Iskowitz, founder and CEO of Ezra Group, a boutique consulting firm that caters to banks, broker-dealers, RIA’s, asset managers and the leading vendors in the surrounding #fintech space. He can be reached at