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Data overload: how to turn Mifid II to your advantage

Data overload: how to turn Mifid II to your advantage

Data, data and more data. There will be an overload of several different types of data following the implementation of Mifid II. But can wealth managers find ways to actually use the deluge of information instead of drowning in it?

‘I think it depends on how accurately they are able to record that data and how they use it,’ said Manmeet Rana, director at Deloitte. ‘Just because they have access doesn’t mean firms will necessarily be able to use that data.’

When Mifid II comes into effect on 3 January 2018, firms will have increased obligations on pre- and post-trade transparency, charges disclosure, transaction reporting and more. Not to mention all the information they already collect on clients for suitability purposes.

‘There are a number of different types of disclosures, which means firms will have a lot more access to data. What that should achieve in providing is a better view of where the market is for particular instruments. In theory there should be a lot more data for pricing or for best execution monitoring,’ Rana explained.

However, she warned that before they can start using the data, companies need to be confident about its accuracy, which is unlikely to happen within the first week.

One company that is currently working on the best way to prepare for Mifid II and benefit from all the data it will supply is Courtiers.

Highlighting that there are still unknowns on the details of the regulation, Caroline Shaw, head of fund and asset management, said: ‘We’re somewhere down the road to understanding what they’re looking for. But there is still a lot of clarity needed. It feels quite tight given there are a lot of systems changes. The brokers and the counterparties and execution venues will surely have way more obligations than we have. It’s not clear how anyone will comply.’

She believes the reporting will allow much better analysis of execution efficiency and will allow brokers to be compared more easily.

‘Not just because we can look at our broker’s data but also every broker’s data in the public domain. You should then be able to see which broker was more efficient. It might help with liquidity in certain closed-ended funds, and maybe in fixed income as well,’ Shaw said.

‘From our perspective, if we can look at a list and find who was most efficient that will be an interesting way to improve our own execution.’

She admitted that although data can be useful, too much data without a way to analyse it is not helpful. However, she still believes that following Mifid II, companies should get some good, usable numbers to not just improve regulatory reporting, but also internal reporting as well as great efficiency. ‘I think people who really benefit will be those who are trading far more regularly,’ she said.

Predicting preferences

Although no one in financial services has implemented such a service yet, Sarah Newman, wealth management director at PwC, believes that one of use of data could be to predict client preferences.

‘This is obviously very much in the space of Amazon and Google. They can see what you’re searching and what you’re buying online and they can make suggestions. It can be positive or negative, but it does give the company an idea of what you want to buy and what you’re interested in. If you use it in a positive way, it can be a positive thing,’ she said.

‘No one has it yet in the financial services space. If they [Amazon and Google] switch their focus away from being a buying tool and go into wealth management, they would do awfully well. It helps the end client to make it more interactive than sitting in front of a person and talking through tax planning etc.’

The chief data officer

In a recent report, Deloitte pointed out that financial services companies needed executives who could ‘protect and create value from data assets’.

A year from now, there will be a greater need to have a dedicated person who can actually create strategies around utilising this information. According to Deloitte, more than 25% of Fortune 500 companies have a chief data officer (CDO) position.

‘As market drivers proliferate and data increases in complexity, volume, and strategic importance, the CDO’s role is expected to evolve into that of a transformational leader and innovator – the executive who can guide an organisation along a journey that enables it to be truly information-centric, analytics-driven and agile in leveraging all available information assets to make better business decisions, better manage risk and be more responsive to the customers and markets it serves,’ the report noted.

Deloitte also highlighted that financial institutions are finally recognising that their data assets can be used for risk management, regulatory compliance, sales and marketing, product development as well as operational performance.

While companies prepare for Mifid II, it may be a good idea to consider a new data strategy and think: how will this change the way you do business? 

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