Five Things You Should Expect From Your Investment Data Distribution Partner

Outsourcing your firm’s investment data management and distribution strategy is a liberating experience.

When investment managers partner with the right vendor, its data marketing strategy can become, at once, more professional, more consistent, more thorough, and more accurate.

The caveat here, of course, is that data distributors have a wide range of capabilities and degrees of automation.

Some smaller firms manually push data for their clients; in essence, managers are merely outsourcing their own internal DIY procedures for manually copying and pasting data into the databases. The quality of service here is highly dependent upon the diligence and conscientiousness of the individual working with the data.

Others have automated solutions that, like the investment databases themselves, vary in their robustness and comprehensiveness.

In either case, what should an investment management firm expect from an investment data distributor?

Let’s look at each of these in turn:

Software that Works

We place this at the top of the list because if the software doesn’t work as expected, it will require significant tech support and extra layers of reconciliation to ensure the data that’s being published is correct. Under such circumstances - if a manager has low confidence in the work that’s being done - any cost savings, both explicit and opportunity, are wasted.

In the case of a firm that manually distributes the data, be sure to ask the vendor what policies and procedures are in place to guarantee the data has been thoroughly reconciled. After all, a simple keystroke error can have drastic implications for a firm (i.e.: 13.52% vs. 1.352%).

With the new SEC guidance coming this fall vis-à-vis advertising and marketing, ensuring your data is correct will be an important compliance concern going forward.

So what are some signs the software isn’t working? It’s not just inaccurate data published across your entire data footprint: it’s also when some databases are published to flawlessly while others are a mess.

That suggests that one of two potential issues:

1. Automation to all the databases hasn’t been fully achieved, and
2. More ominously, it could mean that your investment data distributor is only interested with working with a few select databases - a professional data firm should work for you; should publish your data to all databases in which you want to have a presence. It should never be about their business relationships.

These types of conflicts of interest should be disqualifying.

A Repeatable, Evolving Process

One-size-fits-all processes are lazy and ineffective over the long term. Equally ineffective are those solutions that ask managers to change what they do in order to fit the software.

Rigidity is the enemy of a nimble and/or opportunistic approach to executing a business strategy. Too often, data automation solutions are just that: rigid.

No doubt, there are rules embedded in all software. But a truly helpful approach enables managers to work with the vendor to ensure the procedures by which the data is handled is congruent with their established practices.

Want to use your own templates? You should be able to do that. It’s the vendors job to ensure the software works for you.

And that’s a great way to know who your data distributor “works” for: you or themselves.

But that’s not the only thing. The investment data distribution vendor should leverage their expertise and experience to help the manager review their data strategy regularly, see where things are working and where improvements can be made, thus enabling the overall strategy to evolve over time.

Consulting is a Must

This ties into what we say above: data strategies cannot be set in stone.

Part of the reason managers look to automate their investment data distribution is to ensure it happens faster, with greater accuracy, and with fewer internal resources.

But automation is just one part of the equation. Managers are experts in investing and portfolio construction and management.

Knowing what consultants are looking for? Not always. Understanding what their data footprint says about their firm? Rare. Knowing why the qualitative datasets are just as important, if not more important, than the quantitative, and how to position them to their best effect? Even rarer.

That’s why database strategy consulting is perhaps the most important value-add a top-notch data automation firm can offer. And it should be part of the fee – not an add-on to the service itself.

Equitable Contract Terms

Some firms seek to lock up clients for 12, 24, or even 36 months. While that’s great for them, it can severely limit an investment manager’s flexibility.

The biggest problem with long-term contracts is that they tend to be entirely one-sided. As an investment manager, do you have 36-month contracts with your investors?

Um, no.

So why would an investment manager handcuff their data strategy to one firm for most of a market cycle?

What if an investment data distributor doesn’t live up to their promises? What incentive do they have to return calls and emails on a timely basis if they “own” a manager’s data strategy for 3 years? Why would they immediately jump to fix a data error that was found, no matter how small?

Discounts on long-term deals, bundles, etc. are all nice incentives, no doubt. But we would argue that anything related to the core data automation, management, and distribution service should be included anyway.

Outstanding Client Service

An investment data distributor should work for their clients exclusively, with no conflicts of interest, with no alliances or business relationships that interfere with their client work.

Period.

What should an investment manager look for, in terms of client service, from the data distribution partner?

• A named account executive. No emails to “service” or “support.” You should have a person or team specifically assigned to your account.
• Same-day (or even same hour) reply policy. There’s no reason for a data distributor to not reply to calls and emails the same business day. Not doing so signals a lack of respect for the relationship.
• Strong Focus on Results. How does your vendor define success? 80% reliability? 90%? 95%? 99%? Be sure you pin the data distributor down on these sorts of analytics. They may say, “We strive for 99% accuracy.” Great. What’s your real-world track record? Ask them, then get referrals to check.
• Transparency. Investment managers, in their own marketing, must be able to have answers to the 5 P’s: People, Product, Process, Philosophy, & Price. Your investment data distributor should be held to the same standard. Why do they do what they do? What’s their raison d’etre? How eager are they to help your firm grow and succeed?

Everyone always says, “Clients come first,” but what do they actually do to prove it? Do they create freely available content that’s helpful? Is their website a go-to place for thoughtful answers to the sorts of questions that often vex managers daily? Are they clear and up front about their value proposition and how they tangibly help investment managers to better manage aspects of their business?

These are all key considerations. The last thing you want is to invest time and resources in establishing a new relationship only to have the vendor ghost you (from a client service perspective) once your check clears. This is another reason why long term contracts are bad for managers – it delays accountability.

In the end…

The bottom line is that any outsourcing relationship must make a manager’s life easier – not harder.

It should not add layers of frustration and stress – it should alleviate them. Before entering into a relationship, get referrals. Ask hard questions. Don’t simply take, “We’ve had a great experience” as a final answer. Dig deep and be sure all five of these qualities are demonstrated before making a decision.

After all, your data is your resume – treat it as such.