When the TV show and movie streaming service Netflix strategically decided on producing its own content, its executives had to think hard about what that content might be. The answer didn’t come from the creative ideas screenwriters pitched, but from Netflix’s own customer data. The data showed that subscribers loved movies directed by David Fincher, adored pretty much anything featuring Kevin Spacey, and lapped up political thrillers. Thus, producing House of Cards was a no-brainer. As it turned out, the show was a huge hit.
It’s fair to say that fund managers, many of which talk about the potential of data, have yet to turn insight into action in quite the same way. This will change though. We are now beginning to see asset managers find new ways to monetise their data. In the US, for example, Investment Week reports that Morgan Stanley has begun charging fund managers up to $200,000 for access to its data on intermediaries.
The opportunities created by leveraging data
Many of the ways data will transform the customer-facing activities of asset managers and other financial services institutions have yet to be imagined. Still, diverse ranges of organisations are now trying out ideas in areas ranging from marketing to risk analysis and from product design to customer retention.
For example, social media analytics provide a means with which to test the market for a particular innovation in financial services, as well as to harvest attitudinal data in order to hone marketing strategies. Logs of customer engagement, as well as customers’ own social media activity, may give businesses an opportunity to intervene before a dissatisfied customer goes elsewhere.
For larger organisations with more of a global footprint, the opportunity is to capture a much more holistic picture of customers to better understand their finances and to develop a more targeted customer experience accordingly. Data on customers’ spending habits and behaviours may deliver better-informed risk profiling.
Where will fund managers find such data?
In a recent paper on exploiting the potential of data and analytics, PwC says many financial institutions already have it. “A multitude of customer information is not being leveraged to its true potential.”
- Online banking service channels and interactive voice response logs: tools now exist to extract unstructured data that can be stored and processed;
- Regulatory records: information such as knowing your customer documentation is seen as a cost of doing business but can be mined for insight;
- Transactional records: account statements provide rich material for analytics tools that can predict future spending patterns.
Those organisations able to leverage this data stand to gain competitive advantage. Better customer profiling and segmentation will inform marketing campaigns that are based on granular insight rather than generalised assumptions and widely-held top-level data. It should also enable more personalised service and engagement.
The leading firms are utilising data and analytics
However, financial services businesses must follow the example of market leaders if they are to realise these goals. State Street, for example, has launched a separate data division that considers everything from portfolio modelling to investment analytics as it attempts to better analyse client data and improve risk management. An increasing number of institutions are following the lead of trailblazers such as Citi and Bank of America, which appointed chief data officers before anyone else.
One challenge will be to plug the skills shortages that exist in many organisations. Leading fund managers, for example, are increasingly looking to recruit graduates to work within their data organisations. Schroders, for instance, has an investment graduate programme beginning in August that includes a specific data insight programme.
Ultimately, those that fail to invest in these areas risk being left behind by more far-sighted competitors. In one survey of 400 global institutional investors conducted last year by State and the Economist Intelligence Unit, two-thirds of executives said data and analytics capabilities will be among their most important competitive priorities in the future.
The success of Netflix, a business built from a clean slate on the basis of technology including data and analytics tools, is just one shining example of what is possible. For fund managers that understand how to communicate with their customers – both to speak and to listen – there’s an equally exciting opportunity ahead.
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