With AUM Under Pressure, How Can You Leverage Your Market Data to Boost Your Margins?

Wildfires, floods, hurricanes, terrorism, pandemic. Locally or globally, catastrophe has been arriving with greater frequency and intensity than ever before. Many of these incidents have also heralded significant market swings. But none have been so drastic and sudden as the one caused by the coronavirus.

In just weeks, the global financial markets lost historic chunks of value. With AUM down significantly, wealth managers and financial advisors are under tremendous pressure to protect margins. Where can you cut costs rapidly? You might start by looking at your financial market data provider.

It’s not a question of doing away with market intelligence and up-to-the-minute financial data—you must have these to continue operating effectively. But how much data is necessary? And how much should you be willing to pay for it? If you are using a legacy mega-provider, then you could be paying too much for more data than you actually need.

Financial market data for wealth managers: not a one-size-fits-all endeavor

The legacy platforms target the enterprise-level user. Their business models work well if you need a vast breadth of market data—across hundreds of users.

If you are an independent RIA, fintech platform developer, wealth management service provider, or financial advisor, this isn’t necessarily the case. When margins are at issue, the last thing you need is to pay for information you are never going to look at—and which provides little to no value for your clients.

The impact isn’t just in dollars

Not only do the most prominent financial market data players dominate market share: they restrict choices. Theirs is a commercial model geared toward very few use cases, not a flexible platform that can adjust to customers’ endlessly varying needs.

In a far more customized environment, content and fees align with specific use cases. For example, does your firm need data to assist with trade execution or within a stock screen? As an online advisor platform, your data and format needs differ from those of a large, traditional RIA—shouldn’t this be reflected in your data package? If you’re an equity-focused shop, you don’t need fixed income data. If your wheelhouse is domestic investments, you can do without European exchanges. A flexible license lets your firm subscribe to—and pay for—only the content you need.

The excess hits your wallet—but also your time. More specifically, too much data:

  • Increases expenses. In turbulent markets, you need to preserve every dollar. Paying for feeds you don’t need is never a good use of money, especially now.
  • It consumes valuable time. When markets fluctuate wildly, you need to be laser-focused on the intelligence that matters most to your clients. Receiving data in a format that’s designed around someone else’s needs works great for them. Converting data into your most usable format will carve out fresh efficiencies—and allow you to apply them to your highest value: servicing existing clients, and finding new ones.

McKinsey’s take: “You simply don’t have time.” 

High volatility and significant capital market losses caused by the COVID-19 crisis “can affect how wealth-management firms operate. In the immediate term, the priority is to sustain investor confidence and protect business through continued engagement and communication with the customers,” says a recent McKinsey & Company special report, adding, “In a scenario where physical situations such as face-to-face meetings are avoided, many wealth-management firms may find it difficult to bring new clients on board and increase the share of wallet with existing clients.”

In other words, in the current environment, the priorities of wealth managers and RIAs are to lower costs to protect margins—and monitor how market movements impact client portfolios—and proactively communicate this information to clients. With suddenly constrained resources, the last thing you’re able to do is sift through excess data. You simply don’t have time.

Out of catastrophe rises opportunity

A financial market data feed provider like QUODD is specifically designed to provide accurate, customized, and affordable data feeds to wealth advisors. QUODD furnishes the same high-quality data as industry-dominant providers, but with greater flexibility, so you only pay for what you need, exactly how you need it.

With greater control over your data feeds, QUODD clients can realize much lower costs—saving an average of 25% over competitive data provider solutions. In addition, a flexible data feed solution makes it easier to keep a pulse on client investments and stay alert to the most relevant news.

While the bull market thrived for nearly a decade, it was easy to be comfortable with standard offerings. But times have changed, and margins are much slimmer. Out of crisis lies opportunity.

Now is the time to re-evaluate your cost of doing business, and find savings where you can. Contact QUODD for a demonstration of our Equity+ Securities Workstation, End-of-day Data, and Real-time Data Feeds and start lowering your data costs right away.