How can a game of Chinese whispers be compared to asset management? Most people are familiar with the game. You start by whispering a sentence to the person next to you, this person then repeats what they heard to the next player, and on and on it goes until the very last person.
If you are the person who starts the game, you have very little control over what is being passed on.
The final message is very rarely similar to what was initially said. The game highlights all the ways in which human error can aid miscommunication and misinterpretation.
Losing control of your fund data dissemination in the same way is perhaps every company’s worst nightmare – and what’s more, with the proliferation of websites, new products and complex databases over the past decade, the challenge has very much become a complex technological and operational challenge for asset managers.
What happens when someone gets it wrong?
Unfortunately, it is not uncommon for misleading fund data to be passed along the chain.
For example, a firm recently published contradicting exposure data. Because they used different methods to calculate exposure on their factsheets to their quarterly reports, which were published on the same day, investors were left confused.
While it may seem like a harmless mistake, the repercussions of getting your data publically wrong can be, not only embarrassing, but also severe. The press are often unsympathetic to data inconsistencies and any slip-ups will no doubt feature in press headlines. As a result, a business’s brand can be damaged and investors can shy away from funds because they are unsure which data sources to believe.
Another example of how data can get lost in translation further along the chain is by investment reporters. Imagine the following scenario.
An investment fund reporter gets a hold of the incorrect data, which paints your funds in a negative light, which they then write about. This can seriously affect your brand’s perception with your clients – something that can take a lot of time, effort and money to rectify.
Even if the reporter receives incorrect data that paints your funds in a positive light, it will no doubt have negative repercussions later down the line when the information is corrected.
Either way, there can be misrepresentation of fund data which ultimately affects the end customer and your brand perception.
Considering these repercussions, it is not surprising then that the regulator has taken such a keen interest in the matter. In particular, the Financial Conduct Authority has recently defined its stance in relation to the automation of data processing.
Regulation specifies that fund groups take extra care when outsourcing data management to third parties. The regulation states: “Asset managers should remain alert to the risks of surrendering too much control over key data and mitigate these accordingly.”
So in light of recent guidance, what steps can you take to moderate the risks associated with losing control of your data?
Use the latest technology
Before you think about third parties, you need to make sure your fund data is validated across all distribution methods before it is sent out. But the sheer number of channels make integrating accurate and timely data into all your communications a complicated and time-consuming task.
The ever-growing sophistication of data dissemination services means that you don’t have to integrate your data into all your marketing collateral yourself. In fact, one approach is to use an automated solution to create your fund marketing material.
Solutions in the market can aggregate and validate your data then seamlessly create all your factsheets, KIIDs, website tools and other client-facing collateral using the same clean data. This removes the headache of having to collect all of your data yourself and incorporating it into the multiple distribution channels – and of course the inconsistencies that can arise during this process if your in-house data management systems are not up to scratch.
Having full control and confidence in the data you send out vastly improves the chance of data consistency further down the chain.
Understand your data’s journey
Once your data has left and embarked on its journey, understanding who is producing data and for whom, how often and in what format, will help you ensure that your data doesn’t get muddled further down the chain.
But in order to do this you need to fully understand the journey your data takes once you distribute it. For example, part of understanding your data’s journey is knowing how breakdowns are calculated by the different vendors.
Also, do you know which share class your vendors use as their primary driver unit?
How often do they update their data? How do they get full portfolio holdings data?
Speak to vendors and third parties about these key variables so that you understand their procedures when it comes to handling your data.
When you know where your data has gone, you can also be sure that it is displayed clearly so that clients and consumers have the best chance at making informed investment decisions.
Knowing where and how your data is displayed also gives you the opportunity to push for reforms if you believe that a vendor’s policy for handling or displaying data could lead to misinterpretation.
You don’t have to tackle this challenge alone – build key relationships
When thinking of the complex web your data weaves throughout the industry, it can seem an almost impossible task to understand and control every aspect of it. However, having a few key relationships with experts in different regions could save you from having to do a lot of the data management leg-work.
Whether you are looking at dissemination in Europe, Japan or London, there will be local firms you can rely on to monitor your data for you. These relationships help to build communication with those involved in your data dissemination, and your local data partners will likely have a wealth of advice to impart with regards to regional regulation and best practice.
In short, you can eliminate errors and improve consistency without swallowing resources.
Key tips
As an industry that has been vulnerable to investors’ mistrust, it is imperative that the risk of data inconsistency is mitigated by fund groups. To do this, you can:
- Use technology to aid the integration of your data into multiple channels
- Understand your data’s journey – know exactly from whom to whom your data passes
- Build key relationships with local data experts to relieve the pressure on your firm