FREMONT, CA: Registered investment advisors (RIA) do not consider the custodians as the central hub of technology as there is a shift toward open architecture where the advisors get their tech stack customized from various vendors.
Apart from their primary role to ascertain the security of the assets, the custodians are also providing their advisors with data. Custodians are providing an insight to the advisors over their competitors while some are predicting over the decisions clients might make. Some custodians provide information accessible to them, like compensation packages, business expenses, fee structure, and client acquisition trends.
While gaining from the comparisons with their competitors is advantageous, insights from the retail investors will be beneficial too. Leveraging the information obtained from the retailers can provide a significant boost to the advisor’s business prediction capabilities. However, the custodians have limited access to specific valuable client data such as personal information like name or breed of the customer’s pet or their favorite sports team.
Custodians are getting only the information required for trades, investment action, or portfolio allocation. Though they are trying to collaborate with vendors, they don’t own the data. Client data and trends can be obtained from a data warehouse. A data warehouse collects relevant data at one place and saves the advisor’s time. Further, integration of the latest technologies like artificial intelligence (AI) and machine learning (ML) with the data warehouses will be of utmost business essence.
One way the custodians can benefit immensely is by adopting a predictive, rather than a perspective approach to data and business intelligence. Pershing, one of the leading global financial solutions providers, is investing in AI to understand investor behavior, whether they are considering switching advisors, or how a client may respond to future life events. The custodian is developing a proprietary AI engine that will recommend data-based reports for the advisors.
Other custodians are also striving to gain insights into predictive intelligence. Fidelity, a Boston-based multinational financial services corporation supplies RIAs with a “death date” or the time post which a firm won’t be profitable. Thus, the value of custodians to RIAs will remain essential. An essential consideration for the custodians is to provide the best and relevant services to their RIA clients.