BCG: Advanced Analytics Boosts Your Business
A Boston Consulting Group study reveals that utilizing a firm’s existing data in much bigger and better ways can help advice firms push practice growth. By using so-called advanced analytics, advisories can accelerate their top-line growth, expand profit margins, and harness data to the firm's greatest value. And firms reluctant to take advantage of new analytical capabilities may be left behind.
More personalized data is available today than ever before, letting advice firms create client profiles based on client needs, preferences, context, and behaviors, the study says. And for client recruitment, Michael Silver, of Baron Silver Stevens Financial Advisors, says advanced analytics is an extremely valuable tool that was previously unavailable. Using advanced analytics, Baron Silver Stevens, which advises on $560 million, has personalized its client recruitment targeting highly specialized categories.
“I can give you an exact profile of our perfect client,” says Silver. The firm breaks down target clients with such efficiency that if a potential client in their filtered target dynamics walks into their office, Silver almost certainly knows the relationship “will fit well.” He says the new technology lets advisors build an entire business around their specific client targets – as well as narrow their targets down to very niche groups. But applying advanced analytics is not only useful in client recruitment; it can also aid with client retention.
The study also reveals advice firms can apply advanced analytics to identify early signals clients are getting ready to leave and intervene, reducing client attrition rates by between 10% to 12%, BCG claims. When servicing current clients, BCG insists advisors implementing advanced analytical tools can increase their revenue by between 5% to 10% by personalizing suggestions for clients, up-selling, and cross-selling.
Yet not all FAs are heeding the warning. Older advisors – with egos built over decades – are disregarding advanced analytics because they are unwilling to adapt, Silver says.
The first steps for advisors wanting to adopt advanced analytics are to create a detailed road map, pick priorities, and invest in developing the needed infrastructure, the study recommends. Despite the associated challenges, Silver affirms advisories using old-fashioned techniques will be left behind by competitors that have adopted advanced analytics as best practices.
The Boston Consulting Group declined to provide further comment.