The Nine Deadly Business Intelligence Sins of Wealth Management
In any multifamily office (MFO), the business intelligence (BI) function is critical to success. The BI team is responsible for providing the data and analytics that help the firm make informed decisions about all aspects of their business. Unfortunately, many MFOs fall victim to one or more of the nine deadly sins of BI.
Why is BI a critical function in MFO?
A multifamily office is a company that provides wealth management services to high-net-worth clients. Unlike a traditional financial advisor, an MFO provides a wide range of services, including investment management, trust & estate planning, tax planning, and family office services. Because of the complexity of these services, it is essential for MFOs to have a strong BI function in order to make informed decisions and optimize performance.
In order to help MFOs avoid these common BI mistakes, I have identified the following business intelligence (BI) sins:
The “Sin of Scope Creep”
The first sin is lack of a comprehensive plan. A successful BI initiative must have a clear goal and be well-defined from beginning to end.
Too often, firms try to boil the ocean, attempting to collect and analyze every bit of data possible. This can lead to analysis paralysis and decision-making gridlock.
Instead, develop a detailed plan outlining what data will be collected, how it will be analyzed, and what actions will be taken as a result.
The reason MFOs would want to boil the ocean is multifaceted, but it’s generally because of one or more of these three motivations:
- Lack of understanding about what BI can and cannot do
- Fear of not having all the answers and looking bad in front of senior management
- Pressure from other business units to provide them with data they need to make decisions.
The best way to tackle this sin is to start small. Collect and analyze the data that is most important to your business and work from there.
2. The “Sin of Misaligned Incentives”
In any organization, it’s important to have clear goals and aligned incentives. This is especially true in the BI department, where analysts can easily become obsessed with data for its own sake. This can lead to analysis paralysis and decision-making gridlock.
To avoid this, make sure that everyone in the BI department is aligned with the organization’s goals. This includes setting clear performance metrics and tying compensation to goal achievement.
3. The “Sin of Stale Data”
The third sin is not reviewing and updating data regularly. As the old saying goes, “garbage in, garbage out”. If you are not reviewing and updating your data on a regular basis, it will be inaccurate and irrelevant. The BI team should establish a schedule for data review and update, and senior management should ensure that this schedule is followed.
4. The “Sin of Inflexible Processes”
In order to be successful, a BI initiative must be flexible and adaptable to changes in the business environment. However, many MFOs are bound by inflexible processes and procedures that make it difficult to adapt to new conditions.
This can be overcome by ensuring that the BI team has the flexibility to adapt to changes in the business environment. This includes allowing the team to make changes to the data collection process, as well as the analysis and reporting processes.
5. The “Sin of Data Hoarding”
The fifth sin is not focusing on the right data. In order to make informed decisions, you need accurate and timely data. Too often, firms collect and analyze data that is either irrelevant or outdated. Instead, focus on the key performance indicators (KPIs) that are most important to your business. The KPIs may vary depending on your business, but some that are common to most MFOs include:
- Revenue growth
- Profitability
- Client retention rates
- Staff productivity
- Asset under management (AUM)
The best way to overcome this sin is to ensure that the BI team has access to accurate and timely data. This includes developing a process for collecting and analyzing data, as well as ensuring that the data is updated on a regular basis.
6. The “Sin of Data Anarchy”
The sixth sin is not having a data governance framework. A data governance framework defines the rules and procedures for collecting, managing, and using data. It ensures that data is accurate, consistent, and timely. A good data governance framework will help to prevent data abuse, misuse, and misinterpretation.
7. The “Sin of Relying-too-much-on-Excel”
The seventh sin is relying too heavily on manual processes. Many BI teams still rely on spreadsheets and other manual methods for collecting and analyzing data. While this may be adequate for small firms, it can quickly become unwieldy as the firm grows. Automating data collection and analysis can help to improve accuracy and timeliness, while freeing up staff time for more important tasks. We call this sin the “sin of the present” because it is caused by using outdated methods that are no longer effective.
8. The “Sin of Technology Stagnation”
The eight sin is failing to keep up with changing technology. Technology changes rapidly, and if MFOs do not keep up, they will fall behind their competitors. They must adopt new technologies quickly in order to stay competitive.We call this sin the “sin of technology stagnation.”
9. The “Sin of Decentralized Chaos”
The ninth sin is not having a centralized repository. A centralized repository is a secure location where data is stored and can be accessed by authorized users. A good repository will help to ensure data accuracy and timeliness. It will also make it easier for BI teams to collect and analyze data.
How to Avoid these Sins?
If you are guilty of any of these seven sins, don’t worry — you are not alone. But, you need to address them if you want your BI initiative to be successful.
Fortunately, there are ways for MFOs to avoid these sins. Here are a few tips:
- Develop and execute a BI strategy
The number one action item for this tip is to develop a BI strategy. This strategy should outline the goals of the BI function, how it will be implemented, and who will be responsible for it. Without a clear strategy, BI can become disorganized and ineffective.
- Collect and analyze data from all areas of the business
MFOs must collect data from all areas of the business, including sales, marketing, finance, and operations. This data is essential for making informed decisions.
- Use analytics tools effectively
Analytics tools help MFOs visualize data and find trends that would otherwise be hidden in spreadsheets. Without effective use of analytics tools, MFOs may not be able to identify opportunities and threats. This means using the right tools for the job and using them to their full potential.
- Implement data governance procedures
Data governance ensures that data is accurate, consistent, and reliable. Failing to implement data governance can lead to inaccurate decisions and lost revenue.
- Adopt new technologies quickly
Technology changes rapidly, and if MFOs do not keep up, they will fall behind their competitors. They must adopt new technologies quickly in order to stay competitive. This means staying on top of the latest trends and being willing to change with the times.
- Develop a culture of data-driven decision making
This tip involves changing the way employees think about decision-making. Employees should be encouraged to use data when making decisions instead of relying on intuition or personal opinions. By developing a culture of data-driven decision making, MFOs can avoid the sinsThis will ensure that data is accurate, consistent, and reliable.
- Train employees in BI concepts
Employees who are familiar with BI concepts will be more effective in their roles. This will help employees understand how to use BI tools and make informed decisions based on data.
- Develop and execute a BI strategy
The number one action item for this tip is to develop a BI strategy. This strategy should outline the goals of the BI function, how it will be implemented, and who will be responsible for it. Without a clear strategy, BI can become disorganized and ineffective.
Now ask yourself, can you obtain redemption?
