By Shai Popat, Managing Director, Global Head Product and Commercial Strategy, SIX.
We have all heard the much used phrase ‘generational shift’. As with so many phrases that regularly feature in our industry, the phrase means different things to different people. The next generation of wealth management clients are more tech savvy than ever – mindsets are evolving, demands increasing, expectations mounting, and behaviours fundamentally changing both professionally and personally. But what exactly do these changes mean for the wider industry?
Sometimes, the personal and the professional are not as different as one might think. From Disney Plus and Amazon Prime, to Hulu and a plethora of other viewing platforms, the consumption of entertainment has changed beyond all recognition. It is now all about having tailored programme recommendations. The consumption habits of the new generation and buyers of the future have clearly changed beyond recognition.
The point is, this is ultimately where our industry is heading when it comes to data. Gone are the days of relying on one gargantuan pipe of information to wade through – people simply do not have the time or desire for this. What was once a Fort Knox fortress of insight that only certain individuals could access for reporting, is now a plethora of insight used to drive alpha.
Today, data is no longer for the privileged few, it is a right for many. But while, as in entertainment, the consumption and use of data is changing, in addition to who is using it, the objectives remain the same. The front office wants the most insightful data that help it generate returns, while the back office expects the data to be correct and integrated into its systems.
Take the latest interest rate rise by the Bank of England to 4% in an attempt to try and slow inflation. The challenge is that, with inflation still hovering around the 10% mark, financial institutions are trying to sift through a high velocity of data to find the golden nuggets of information to act on in order to deliver alpha.
The good news is that financial institutions see growth potential from the enhanced value they can derive from data and analytics to generate alpha. Nearly a quarter (24%) of respondents to our future of finance survey of c-level executives across 300 financial institutions said that data and analytics is an investment priority. You could call it looking back at what the data showed around the impact of past inflationary periods on markets, in order to better grasp what might happen in the future. Certain events are, of course, harder to assess from a historical data perspective than others.
After all, global monetary tightening is something that has been alien to us for decades, until now. This is where the underlying data has a vital role to play. But underlying data is nothing if you cannot connect it to your securities of interest, your portfolio, or your assets under management.
To reduce any potential risks associated with adopting any new data sets, a financial institution must be grounded in historical trend-based analysis. The painful pincer movement of high inflation and declining global growth means now is not the time for financial institutions to wait for answers tomorrow. Shareholders and customers are seeking out fresh thinking to drive opportunities for growth, while also relying on stability, clarity, and certainty to navigate through the challenges of today.
To navigate throughout these times of change, the democratisation of data is key to ensuring continuous innovation and delivery to transform today’s financial system. Regardless of whether it is core reference, pricing, or other source of data, financial institutions need provenance and purity of data, and security of decisions made to cover reputational risk, fines, and those all-important key risk indicators.
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