Predictive analytics ‘the future’ for the investment industry

Professionals in the investment sector will come to rely much more heavily on predictive analytics solutions in the coming years when they are looking to analyse their clients' behaviour and measure themselves against competitors.

This was the conclusion of a group of broker-dealer professionals who discussed the future of the industry with at a recent technology conference.

They agreed that the primary goal for the use of big data analytics in the investment sector will be to offer advisers more insight into the decisions being made and identify trends or client risks before they occur.

Aaron Spradlin, chief information officer at United Planners Financial Services, told the publication that to achieve this, professionals will have to turn to outside software in order to effectively add predictive elements to these activities.

"When you look at big data, it's very sophisticated, and there's some really cool tools out there, but it's not easy to do," he said.

There was agreement among the experts that while all the data necessary to identify potential risks and opportunities already exists, it is only recently that the tools to unlock this have become widely available.

For instance, Mr Spradlin stated that until now, the majority of his firm's activities have been focused around data collection, drawing together large amounts of information about advisers and clients.

It can then use this to offer advisers compliance guidance, looking at trends and behaviours and using those to write better alerts, he said.

James Clabby, chief information officer at AIG Advisor Group, added that advisers can already use this detailed client information as a tool to make better decisions. For example, by pulling together a list of all clients with a certain amount of assets and a certain percentage of that in cash, an adviser can engage them on where that money might best be invested.

This is one example of how professionals are using analytics today, with Mr Clabby describing this as "little big data".

However, moving from this to the next stage of evolution, where predictive analytics can be used to dictate all of a professional's decision-making, will typically require a major investment. 

Mr Spradlin said: "I don't have money to invest significantly in this area, and I think that's where we're hoping for innovation from the industry, from … bigger firms that might step in and say, 'Hey, pass us the data, we'll automate it and pass it back'."

The experts also stated that increased regulation is likely to be one of the big challenges for the investment sector as analytics and the use of potentially sensitive data becomes the norm.

It will also be important to ensure that this information is being handled sensitively so as not to create privacy concerns. Gary Gagnon, vice president of technology for Cambridge Investment Research, warned: "There's the danger that we face that we could become so effective at using big data about individual clients and their decisions and their plans that it might actually alienate some people."

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