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Tap into the true value
of analytics
Organize, analyze, and apply data
to compete decisively
Preface
From the Editors Desk
1. Post-Crisis Analytics: Six Imperatives 05
2. Structuring the Unstructured Data: The Convergence of 13
Structured and Unstructured Analytics
3. Fusing Economic Forecasts with Credit Risk Analysis 21
4. Unstructured Data Analytics for Enterprise Resilience 29
5. Why Real-Time Risk Decisions Require Transaction Analytics 37
6. Ten Questions to Ask of Your Optimization Solution 47
7. Practical Challenges of Portfolio Optimization 55
8. Analytics in Cross Selling A Retail Banking Perspective 61
9. Analytics as a Solution for Attrition 69
10. Customer Spend Analysis: Unlocking the True Value of a Transaction 77
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11. A Dynamic 360 Dashboard: A Solution for Comprehensive 85
Customer Understanding
12. Developing a Smarter Solution for Card Fraud Protection 93
13. Using Adaptive Analytics to Combat New Fraud Schemes 103
14. To Fight Fraud, Connecting Decisions is a Must 109
15. Productizing Analytic Innovation: The Quest for Quality, 117
Standardization and Technology Governance
16. Analytics in Retail Banking: Why and How? 125
17. Business Analytics in the Wealth Management Space 135
Analytics for a New Decade
Revitalize Risk Management
Optimize to Drive Profits
Understand Your Customer
Fight Fraud More Effectively
Improve Model Performance
Leverage Analytics Across Lines of Business
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Content
Today's difficult investing environment has (if nothing else) driven one thingan
increasingly demanding breed of investors. From managers of institutional investments, to
high net-worth individuals, to trusts, investors want an increased breadth and depth of
information. To effectively respond to these demands, wealth management firms must invest
in improved information management and analytics. This article provides a roadmap for
firms to harness the power of information and satisfy the new breed of investor.
17
Business Analytics
in the Wealth Management
Space
Harpreet Arora
Client Engagement
Manager,
Banking and Capital
Markets,
Infosys Technologies
Limited
K N Rao
Principal Tech Architect,
Head, BI Consulting,
Infosys Technologies
Limited
corporations, and trusts. Catering to the needs
of these clients is a team of advisors, researchers,
client relationship managers, portfolio
managers, traders and brokers, that work to help
clients make investments across a swath of
productsequities, debentures, mutual funds,
futures, works of art, commodities, fixed
deposits and ETFs.
To achieve the necessary portfolio growth, firms
are increasingly learning to harness the power of
their informationoften through analytics.
However, to accomplish this, they must first
understand their data and structure it
appropriately.
Introduction
Wealth Management is undergoing a major
facelift these days. The golden era of eternal
increases in investment values has passed. The
credit crunch, recession, regulations, and
continued global financial instability have
forced consumers and wealth managers alike to
err on the side of caution.
Despite a rapidly evolving competitive
landscape, wealth management firms need to
adapt to economic and market developments,
and continue to focus on their clients'
portfolios.
For most institutions, these clients take the
form of high net-worth individuals (HNIs),
Guruprasad Rao
Senior Industry Principal
& Head of IT Consulting,
Architecture & Innovation
Enterprise Solutions
Infosys Technologies
Limited
Analytics in
Financial
Services
6
Wealth management lifecycle Figure 1
TRANSFER
?Charitable Giving
?Legacy Planning
?Wealth Stewardship
UTILIZATION
?Retirement Income Planning
?Inflation Protection
?Long Term Care Planning
PRESERVATION
?Risk Management
?Tax Mitigation
?Business Succession Planning
PROTECTION
?Insurance Planning
?Asset Protection
?Portfolio Risk Mitigation
GROWTH
?Asset Allocation
?College Planning
?Retirement Planning
Wealth Management Lifecycle
TRANSFER
UTILIZATION
PRESERVATION PROTECTION
GROWTH
Managing a Wealth of
Information
Disparate Information
The investment advisory teams work on
different sets of applications as they deal with
a variety of investment products. Clients may
not be interested in all the investment
avenues offered by a wealth management
unit, hence their details may be scattered
across various trading applications. At times,
this results in storing customer details
differently across disparate applications.
Some applications need to store investment
details for a short time only, while others
need to store the details for a very long
timeprimarily due to regulatory demands.
A typical wealth management team needs to
prepare a list of reports for clients as well as
for the bank (if not independent) on a
periodic basis. Table 1 highlights reports that
are often prepared.
Complex Information Requirements
Depending on the client relationship,
investment decisions are made either on a
discretionary basis or a non-discretionary
basis. Wealth management organizations
earn their revenue based on a fees and
returns basis, so it is imperative for them
to track the value of these investments and
align them to the market on a periodic basis.
Apart from this, the wealth management
firm is also interested in understanding
which investment advisor is generating
more income, which portfolio manager's
mutual funds are doing well, and which
researcher is performing research with a
high-value-add that can be leveraged for
greater returns on the investment.
Wealth management firms are also interested
136
7
in understanding the risk appetite of their
clients and the nature of their investment
portfolioboth critical in suggesting a
suitable investment strategy.
Information Management
Framework
All this calls for effective information
management and dissemination to all
parties concerned. The Information
Management Framework (IMF) should
enable the establishment of a single version
of the truth, and enable the viewing of
the complete investment portfolio segregated
by clients/ sectors/ investment arenas/
profiles. Such a framework should also
associate the influencers and decision-makers
within the wealth management organization
to specific actions/ decisions. Finally, the
framework should effectively reflect the
earnings/ losses and other fees and costs
involved in various transactions.
To get started, data must be collected from
trading systems and other record storage
systems and assembled to reflect individual
client portfolios. A complete list of master
data (including the customer master data
and trading reference data) also needs to be
maintained. This master data hub can also
act as a golden source for master data and
meta master data for the entire unit/
organization. The proper communication
and exchange of meaningful information
across various individuals, departments,
and stakeholders is critical.
Most importantly, for the IMF to function,
the source systems' data must be arranged in a
meaningful manner, with a provision to store
detailed transactions and other details on
clients, products and industries. Provisions
137
Performance
Attribution
Performance of the various components of the clients' investments,
across different industries and instruments
Risk Market Risk statement to the customers on their portfolio
Cash Flow Cash Flow information to the customers
Fee Paid
Valuation
Corporate Action
Physical Certificates
List
Securities
Reconciliation
Fees collected and invoiced to the customers
Mark to Market valuation of the Investments /Assets
Dividends due & Corporate Actions due
List of Assets in Physical Certificate form
Reconciliation statement
Report Type Description
A wide array of wealth management reports Table 1
Holdings
Benchmark
Comparison
Reconciliation
Cash Management
Exhaustive list of all the holdings in different forms
Comparative statements: Plan Vs Actuals
Reconciliation of the expected cash flow from sale / purchase of assets,
dividend allotments with the physical / demat list of certificates
Reconciliation, Overnight balances, Overnight calls
8
should be available to look at aggregated
data and then drill down to the details
when required.
In such a manner, the IMF unites the entire
wealth management unit for information-
sharing through master/ reference data
standardization. It also enables the unit to
bring out the single version of truth, as it
integrates the source systems' extracted data
at a target database in a single schema.
Information management framework components Figure 2
SOLUTIONS FRAMEWORKS PERSPECTIVES
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PLATFORMS ANALYTICS INDUSTRIES
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W
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PLANNING &
BUDGETING
BUSINESS
DECISIONS
ANALYTICAL
WORKFLOW
Performance Management
Framework
A Performance Management Framework
(PMF) can be defined on top of the
es t abl i s hed I MF t o moni t or t he
organization's health on a number of
aspects. This is accomplished through the
use of a well-defined set of KPIs and Metrics.
Essentially, the PMF on top of the IMF
provides a single version of the truth made
available in a prioritized and easily
understandable format.
The set of KPIs and Metrics can easily be
divided into the following subject areas:
Assets Growth
Clients Growth/ Churn
Assets Quality/ Products
Credit Risk
Operations Risk
Other Financial Metrics
Empl oyee Product i vi t y ( Trader,
Investment Advisor, Client Relationship
Manager)
Employee Effectiveness (Investment
Advisor)
Process Effectiveness
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6 138
9
Logical architecture of information management framework Figure 3
Enterprise Data Sources (Multiple, Disparate)
Databases
Applications
Flat Files
Information Processing & Integration
Information
Acquisition
Information
Consolidation
Information
Transformation
XML/
Unstructured
rd
3 Party
Interfaces
Information Organization
Information Enrichment Verification & Validation
Information Analysis & Presentation
Graphical Analysis Information Presentation & Sharing
Business Analytics Dimensions
Customer Partners
Delivery
Channels
Content
Some of the applicable KPIs/ Metrics under
the above-mentioned subject areas are
expanded upon in Table 2 on the next page.
Business Analytics
Framework
Business Analytics (BA) play an even
greater role in increasing the wealth of
the clients, by providing critical insights
into the markets, geographies and
economic trends. BA enables this by
analyzing the data that is already
gathered through the IMF and perfected by
the PMF.
For example, by using analytics, a firm can
create an interactive environment where
clients carry out a variety of simulations
hypot het i cal l y redi st ri but i ng t hei r
investments across different asset classes
and geographies. BA, by the way of a
Gl obal Bal anced Asset Al l ocat i on
System (GBAAS), can play this role.
The important inputs required for
the BA environment to function are as
follows:
Master data in dimensional hierarchy,
along with the customer investment
profile and risk appetite
Research data arranged as per geographies,
industries and focused organizations
n
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7 139
n
n
n

Projections on the research data for about


10 years
Research data categorized and profiled
into different risks
Availability of statistical tools, interactive
visualization tools and interactive
decision-making data architecture
SI No. KPI Parameters Subject Area
Applicable KPIs and metrics Table 2
1 ?Volume of business growth across category, with existing
clients/new clients
?Speed of business growth across category
?Advise to order conversion ratio, with discretionary/
non-discretionary?
?Net new growth across categories
Assets Growth
2 ?Number of new clients added/ churned
?Product categories exited /entered by new/ existing clients
?Net new growth in clients
?Client satisfaction
?Client interactions
?Cross-selling results
Clients Growth /
Churn
3 ?Assets category performance
?Client's assets at risk/ problem across categories
?Client portfolio performance
Assets Quality /
Products
4 ?Client's actual credit risk vs preferred risk appetite
?Asset portfolio's actual credit risk vs allowed risk
Credit Risk
5 ?Industry Concentration Risk
?Compliance Risk
?Statutory Risk
?Documentation Risk
?Settlement Risk
Operations Risk
6 ?Risk adjusted return on economic capital
?Return on risk adjusted assets
?Liquidity
Other Financial Metrics
7 ?Client on-boarding efficiency
?Number of trades executed per hour
?Number of settlements done per hour
?Number of Mark to Market (MtM) done per hour
Employee Productivity
8 ?Number of discretionary vs. non-discretionary agreements
?Trades/ sales quantity by category
?Target Achievement
Employee Effectiveness
9 ?Number of Staff at different operations
?SLA adherence
?Number of mistakes
Process Effectiveness
n
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Ability to drill down from the KPIs to


dimensional architecture, and then to
contributing detailed transactions
Most importantly, the ability to model
the data for some projections and
simulations
6 140
Technology Framework
Technology architecture for business analytics Figure 4
Internet Mobile
Business Process Management
Portal Server
Intranet
Allocation
Engine
Risk
Modelling
Simulation
ESB / SOA
Business Intelligence
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B
2
B
Stock Market
Feeds
External
Analyst Feeds
Internal
Analyst Feeds
Equity
Research data
Market Risk
Directives
Asset
Manager
Analyst
Desktop
LDAP
Legacy
Apps
Warehouse
Enterprise
Apps
Intermediary
Operational
Data Store
The technology framework should address all
the three frameworksInformati on
Management, Performance Management and
Business Analytics. This forms the
underlying foundation for addressing the
functionalities.
The important components of the Technology
Framework are:
Data Integration (DI)
Data Management (DM)
Data Arrangement (DA)
Data Exploration and Analysis (DEA)
n
n
n
n

Data Integration (DI)


Component
The functionalities expected from the DI
Component are:
Extraction: Automated data extractions
from internal and external systems, either
in a data pull or push method.
Sometimes, for important data, it is
required in a real-time manner.
Validation: This is very important to
ensure the accuracy and completeness of
the extracted files.
For the data integration component to work
efficiently, without interfering with the
performance of the source systems, the
n
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7 141
required data is extracted in as-is manner into
a staging area, in text files. From here, the data
is loaded into tables for easier handling.
Data Management (DM)
Component
The functionalities expected from the DM
component are:
Cleansing: Data cleansing is required for
data coming from source systems that is
not clean or standard. This step ensures
that the data is standardized: using one
set of rules for the format and meaning.
Transformation: The transformation
rules perform simple to complex
calculations and arrange master data in
hierarchies.
n
n

Data Arrangement (DA)


Component
The functionalities expected from the DA
component are:
Data Model: Schema is the most
important overall technical component.
This dictates the way the data is arranged
to ensure consistency and accuracy.
Usually, a normalized schema is required
for these activities.
Dimensional Data Model: This type of
data schema ensures an interactive
environment for the business users. This
also allows the data to be drilled up and
down along the hierarchies presented in
the master data.
Sometimes data may be arranged in
departmental data marts, i n a
combination of dimensional and
aggregated techniques, to enable the
departmental users to exclusively work
on them.
Data arrangement also makes the master data
n
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hubs golden sources of master data for the


entire organization's use.
6 142
Data Exploration & Analysis
(DEA) Component
This layer forms the interaction and
exploration layer for the business users. The
functionalities expected from this DEA
component are:
Allow external and internal users selective
access to the data by defining security
rights.
Provide various exploration means in the
form of standard reports, ad hoc reports,
KPIs/ Metrics and alerts through
Dashboards.
Interactive visualization tools also come
under this categoryenabling users to
explore the data in their own way to
identify outliers and trends.
Statistical tools enable the users to
perform some future projects and trends
using the historical data.
To be effective, the Technology Framework
must have the capability to seamlessly
integrate and orchestrate with back-end
applications, legacy applications, and
enterprise applications.
n
n
n
n

Conclusion
Several leading banks in the wealth
management space are in the process
of making major improvements in
their information management capabilities.
In most cases, these changes are occurring
in the statutory area and risk management.
However, this is only a stepping stone.
Wealth management firms can tap into
the potential of business analytics to
di fferent i at e and ensure cust omer
satisfaction.

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