“Data as an asset is a theme that comes up in conversations time in and time out. It’s almost universally across size of customer, market segment, go to market strategy in terms of employee or independent contractor model. Data as an asset is a conversation that we have every day with our existing customers and our prospects.”
–Jeff Marsden, Chief Product & Strategy Officer, Xtiva Financial Systems
When Jeff Marsden talks about data as an asset, he’s speaking from experience. As one of the co-founders of PriceMetrix, a research and software firm focused on the wealth management industry, he knows that many companies need help understanding how best to leverage their data to guide their tactical and strategic planning. “The road to success is paved with data”, has proved to be true in more ways than one.
I spoke to Jeff about his company’s clients are talking about, how they align their data to match their ambitions, how firms can dig out from under a mountain of tech debt, and more on this episode of the WealthTech Today podcast.
- What is Performance Intelligence? [03:48]
- Agency of Advisors is Power [12:33]
- Removing Friction & Adding Incentives [22:50]
Complete Episode Transcript:
Craig: It’s a fantastic day in the wonderful world of wealthtech. Welcome to episode 81 of the WealthTech Today podcast, I’m your host, Craig Iskowitz, and I run a consulting firm called Ezra Group. We’re experts in wealth management technology, operations, and strategy. We deliver growth-oriented solutions to broker dealers, banks, asset managers, RIA aggregators, and especially to their technology providers through our premium advice and targeted market analysis.
On this podcast I speak with some of the smartest people who are on the leading edge of technology and innovation. When you have a moment, please head over to our website EzraGroupLLC.com, and sign up for our newsletter. You will be rewarded with regular updates and excellent thought leadership content.
Before I kick off this episode, I’d like to tell you about an announcement that just went public. Ezra Group is partnering with Xtiva Financial Systems, a leading provider of sales performance management technology in the financial services industry. We will be offering consulting services designed to help enterprise wealth management firms optimize and streamline their performance data architecture so they can better prepare to implement advisor compensation platforms like Xtiva. You can learn more about our consulting services and read the full announcement on our website, EzraGroupLLC.com, or at Xtiva.com.
And I’m happy to introduce my guest for this episode of the Wealth Management Today podcast is Jeff Marsden, Chief Product and Strategy Officer for Xtiva Financial Systems. Jeff, welcome to the program.
Jeff: Hey, thanks for having me, Craig.
Craig: I’m glad you can make it. And Jeff, you’re calling in from beautiful Toronto, Canada.
Jeff: Yes, I am.
Craig: I miss Toronto and I miss traveling.
Jeff: I miss New York. So touché.
Craig: And I miss seeing you in all different cities, we used to be able to meet in San Francisco and Florida and all over the place.
Jeff: There used to be a thing called events, but I don’t know what happened to those.
Craig: Gone, gone, gone, nothing we can do about it. So Jeff, can you please give us the 30 second elevator pitch for Xtiva?
What is Performance Intelligence?
Jeff: Absolutely. So Xtiva is a performance management platform for financial services firms. We grew out of compensation processing and we help a variety of organizations, mostly in the wealth management and insurance space, manage the success of their distribution systems. That includes compensation, performance, intelligence, some enablement capabilities driven by machine learning as well as change management and talent management consulting practice.
Craig: So we used to call it advisor compensation, but now you’re calling it performance intelligence. What’s the difference?
Jeff: Well compensation is still part of the mix Craig, but the key here is that it’s important to recognize that compensation, it’s an incentive that drives an economic system. That happens to be a system that’s internal to the organization, but its incentives are critical to the economic system, and getting your incentives right is absolutely obviously critical, everyone knows that. But the answer to what is right comes back to what’s the performance you’re trying to achieve within the organization or to support your staff in achieving, because obviously they have their own ambitions and needs, particularly in the wealth and insurance space, there’s a lot of franchise behavior or agency behavior that’s important to the success of that channel. So when we say performance intelligence or performance platform, we’re talking about how do you use the tools that are available to you, compensation, insight into the performance of the organization, enablement capabilities, to force multiply the results that you get out of your distribution system. Making advisors happier and ultimately customers happier too if they’re getting more and better time with their advisor.
Craig: You mentioned customers and advisors. So your customers in the financial services industry are using your software, what are some of the things they’re telling you? What are the trends you’re seeing in the space?
Jeff: Yeah, sure. So we work with about a hundred customers across North America. The largest is north of 10,000 frontline financial advisors and the smallest is probably count on your hand the number of advisors. So we see a really broad range and organizations that I would say are offering a more fulsome package of products and services, and some that are very narrowly focused on a deep expertise or a deep focus on a particular product area. But almost universally across that population they’re talking to us because they have a need to either remunerate their people or they have an aspiration around driving further performance out of the distribution system. But the conversations today, the conversations over the last 18 to 24 months, they’ve been more over Zoom of late than they have been face-to-face, but I’ll tell you, Craig, data as an asset is a theme that comes up in the conversations time in and time out.
Almost universally across size of customer, market segment, go to market strategy in terms of employee or independent contractor model, data as an asset is, as a category, a conversation that we have every day with our existing customers and our prospects. It can mean a lot of things, but I would suggest this, organizations realize that being able to think more broadly about their data, that data that they have in their control, that they can bring into their control, how to organize it, but how to really extract value from it and empower their advisors in particular, platform broadly, but also probably the organization, is becoming a top of mind consideration for them.
Craig: It seems like it would be top of mind. It seems like it would be something that they need to have and how can they better leverage their data, how can they extract value? It’s something every firm has, but it’s sort of like buried in the ground. It’s like gold buried in your backyard, and you wouldn’t know it’s there. You just have to dig it up, but how do you help them? So how do you help them as we were talking earlier, how do you help them figure out how get their data to match the ambitions they have as a business?
Jeff: Yeah, I like your analogy of being buried in the ground. The organizations have a ton of data and they use it incredibly effectively in a lot of areas. Where they’ve struggled to use it, or haven’t necessarily marshaled the necessary resource to get it organized as an asset, has been in how the front office or the distribution system has been managed and enabled. So it starts with clarity around what your strategy is, and we talk a lot at Xtiva about ultimately connecting your strategy all the way through to execution. And data’s really the common thread that enables you to do that effectively to understand how to align your tactics to the strategy and how to support the execution at the frontline.
We challenge our customers and we enable our customers fundamentally to answer a few questions. And there’s there’s a sort of a cascade or a sort of logical flow to that, which is, and this is not rocket science. Like, how am I doing? Do you really know how you’re doing and not necessarily in the traditional sense, which is how many widgets that I pushed through the system today, but were they the right widgets? Did they go to the right place, where they creating value in the longterm? And that leads to the next question, which is how should I be doing. And ensure you have good frameworks around thinking about how I should be doing as an organization or an individual within that organization. We can talk a little bit, perhaps in a minute around understanding the taxonomy of users in terms of their ability to consume information and respond to it. But let me finish, the third level of that is what can be done.
And now we’re getting into the tailoring of the execution of the organization, which leads to how do you do it. At the end of the day, if you think about the common aspect of most of these businesses, it doesn’t really matter whether you’re talking about a bank with more guard rails and how it goes to the market, versus a an independent contractor model that has fewer guardrails. At the end of the it’s the agency of those advisors that’s the power in the organization. That agency can also be challenging when you’re trying to bring a strategy to life, because the more agency that exists in that distribution force, the more opportunity there is for them to find opportunities to pursue opportunities, but also for deviation from where the strategy is. And when the organization is the one largely marshaling the capital, you want to align that to the strategy.
Agency of Advisors is Power
Jeff: Yeah. At the end of the day agency is the power for them to decide who they deal with and how they deal with them largely. But it manifests itself in the form of innovation around how they market, it manifests in the form of customer service models. It manifests in the form of approaches to pricing, it manifests itself in the form of how they use tools. I think if we were to probably, and you and I certainly know a lot of financial advisors, Craig, but I think if we were to randomly pick 12 financial advisors and bring them into the studio and talk to them about financial planning, I would bet we would get 12 different answers about how they use financial planning. And I’m not saying it should be consistent. I’m not saying there’s a universal approach, but those 12 different variants on how they use financial planning is a result of that, the power of that agency.
Craig: Yeah, it is true. You know, I think Eric Clarke from Orion said, when you’ve met one advisor, you’ve met one advisor, they’ve all been there.
Jeff: It’s an interesting point. And we’ve been working very hard at Xtiva over the last few years, we launched a cloud native platform called Xtiva Cloud a few years back, and all of our capabilities now sit in that Xtiva Cloud platform. One of the things that we did with our reward application, so our compensation toolkit as best described, is to ensure that organizations could actually manage in a relatively scalable fashion compensation plans have won. And I’m not saying if you had a thousand advisors have a thousand compensation plans, but there’s an acknowledgement that in some organizations or some go to markets, the way that some organizations go to market a high degree of flexibility around supporting that agency is critical. The uniqueness of those practices, those businesses.
Craig: Yeah. There seem to be a lot of ways to skin a cat there, and a lot of ways to set up your systems, but let’s go back to data as an asset. What are some of the other things with your clients and how they’re using data or how they’re asking you to be able to use their data? I mean, they probably want more of it. And how do you help them get that data out of the system, into your system and then back out to the systems that kind of, yeah.
Jeff: Yeah. Well, yeah, you’re right. We have those conversations every day. I had one at three o’clock yesterday, I’m going to have one at four o’clock today. So it’s top of mind. You know very well, the ecosystem that exists for wealth management and insurance, it’s incredibly complicated, it’s incredibly diverse. Data sets in all manner of places. Formally. It also sits informally all over the place, including a ton of customer information that resides natively in the practice of the financial advisor. And it’s rich, powerful information, and organizations are starting to think about that. And they’re thinking about it, the really thoughtful ones around how do I make my data a better asset to me as a business are thinking about it in terms of what questions do I want to be able to answer?
And when they challenged themselves about what problems or what questions I want it to be able to answer, the scope of information that if you allowed your creativity free reign, the scope of information that you would want to have reliably, and trustingly at your fingertips to deploy to answer those questions probably magnifies by five to 10 times, what is typically available to firms today in their normal operating environment. So the conversations we have focus on three things with our firms, and we can talk about the tools and the strategy that they’re embracing, but sort of coming back to that, we have lots of conversations about how do we help them find and bring more data into their performance environment. And whether you want to use that for the purposes of compensation, or you want to use it for the purposes of understanding the performance, the behavior of the organization, from a performance perspective, the performance of the distribution system, the approach, your answers may be different. Bug you’re still thinking about it from the perspective of how do I put myself in a position of my colleagues don’t like it when I say this word, but how do I put myself in a position of weaponizing my data?
Craig: That’s powerful wording.
Jeff: It is, yeah. So the second question that comes about is, well, okay, I can think more broadly about where it is and now, how do I get it? How do I make it available? And one of the things that arose out of a number of customer conversations three or four years ago was the importance of an integration platform for wrangling data and wrangling in a reliable fashion, or to maybe make it sound a little less wild West is how to domesticate data effectively. So we built a platform called Xtiva Connect, which is designed just to solve that problem, which is to easily get information in and out of our application or our platform for our customers. It’s an I-PASS integration platform. Lots of there’s several out there.
It’s it’s an area of a lot of investment for many organizations, but it was critical for us to be able to respond to the needs of our customers. So what is the data, think about it more broadly, think about it in a very creative integrative sense, and try to think about it in terms of problem or question use cases that you want to be able to respond to, in addition to the need to use it for operational purposes, how do I domesticate the data? Second question, third issue. Third conversation point is how do I get it to the right places?
Let’s assume some magic happens inside of Xtiva. Remember this conversation is in the context of you know, discussion between us and our clients. Maybe it’s been used for compensation. Maybe it’s been used for some next best move type of enablement algorithms or some forecasting capability. But how do I put it in a spot that the users are going to easily be able to access it and make use of it?
And this is a frequently under-appreciated aspect of what we believe organizations should attend to, which is to really think very carefully about what information they need to present to whom and where. And the where is the piece that people forget. There’s a tendency to follow the path of least resistance. Well, just put it to place that we can get it to easiest. And quite bluntly, that’s the lazy answer. The best answer is meet the user where the user best should be. Get them the information that they need, where they best should be. And whether that’s a financial advisor or someone in an operational role, or a finance person, or a coach, I don’t really care. They’re all going to have a unique spot where they should best be. And that could be described as an application. It could be described as a device, there’s a variety of ways of describing it, but that’s the critical piece that a lot of organizations fail to invest adequately in, is figuring out how to get it to the users in the right place.
Craig: It seems as though that’s something that every firm should want. They want the data to be where the users can get to it. They want to have it in the right places, but it seems like a lot of firms aren’t doing that because they’re just too busy doing their job and getting things done to really have a data architecture or data policy across the organization. I mean how would you recommend that clients do that? I mean, I imagine a lot of firms have a shotgun approach for operations when it comes to compensation and performance management, how do you get them to organize their thoughts and organize as a single comprehensive unit?
Removing Friction & Adding Incentives
Jeff: Yeah. Good, really good question or collection of questions there, Craig. So first of all, I think part of the reason that we end up in the situation we’re in is sort of twofold. One is there’s a lot of old tech out there. There’s a lot of tech that’s accumulated and is hard to unwind. And then sometimes the larger organizations have not that problem in a linear fashion relative to the small ones, but an exponential problem in relative to the smaller customers. So there’s just a debt problem, which constraints even the most ambitious organization, sometimes in that regard. Also, and you’ve written about this, you monitor this space, perhaps as best as anybody does, which is, there’s an awful lot of really compelling capabilities out there in the wealthtech and FinTech space.
And a lot of organizations have added some really great tech to their platform to help their users, whoever, whatever that user is. And all of those decisions that were made to add this tool or that tool were probably all very well made to solve a problem that we have. But that explosion of capabilities also means that users are now asked to fight through, in some respects, a menu of choices about what they should do. And sometimes in fact, all too often, user experience friction arises because of that plethora of capabilities. So, so there’s some foundational issues that are there that can and should be thought through.
And to your point, how do you, how do you invest in the right sort of consolidation strategy for that? And we would say a couple of things, one don’t assume that there’s only one place. So there could be different places in different contexts. It could be different reasons for a user to be in a spot under different contexts. So figure out what information is powerful for them in each of those places and make it available there. Two, if you do not have a design thesis internally around aspiring to zero friction, in terms of the user experience, your design thesis is missing a big and important aspect because friction either steals value from the user in terms of, they’re not able to bring their value to the end user because they’re busy being frictioned. Spending time or energy on friction. Or it wears them down and they are incentivized to not use something. So the importance of identifying, removing friction as much as possible can’t be sort of under-appreciated.
Craig: That’s a good buzzword. Isn’t a friction buzzword? We hear that all the time, we want to remove friction. We want to get rid of friction. We want to have a frictionless user experience, but what does that really mean?
Jeff: Well, so I think about it in this fashion. Enterprise has done a pretty poor job relative to consumer and the user experience. So the ease with which you can interact with something on your phone or on the computer screen, the ease with which the functionality is delivered for much of the new consumer tech would be a better sort of representation of a lower friction or zero friction environment or experience. But basically it’s this you want to, you enable the user to accomplish their goal with as few actions as possible. Actions includes clicks, copies, and pastes, quite frankly, includes thinking. An interesting example of low friction would be, and then this is perhaps a bit of a stretch from a wealthtech perspective, but you know, the ease with which you can get an Apple credit card today would be an example of an incredibly low friction experience. It’s basically a click, and five minutes later, it’s in your wallet, right? Right. The ease with which you can do things.
So the final piece of the puzzle is incentives. And when I say incentive, because I come from Xtiva, which grew up for over the last 20 years of being an incentives or commission processing incentives, processing organization, people automatically assume I’m talking about paying people to do something. And I’m not necessarily. When it’s important to think about how you as an organization, create incentives for your users to embrace the tools that you’re giving them, or embrace the services or capabilities that you’re making available to them. And that could be in the form of remuneration. It can be in the form of quite frankly, friction is a contra incentive.
There’s nothing wrong with a little bit of friction, if you don’t want someone to go somewhere, but you don’t want to take it away from them either. I remember many years ago, this is a previous life, but the head of a private client business said to me once, it’s about the mouse hole you leave, not the mouse hole you take away. He was, he was referring to encouraging advisors, encouraging wealth advisors to go in a particular fashion, to embrace a particular kind of business. And his comment to me was really reflective, think about the mouse hole that we leave, not the ones we take away. We wouldn’t want to encourage the path through that mouse hole less about the fact that we’re closing off the other one.
So I say friction can be a contra incentive. But information people respond to, I mentioned taxonomy about 10 minutes ago, users or advisors or operators all respond differently to tools. Taxonomies are used in all manner of things, perhaps the single best known or most advanced application is in gaming. Where games are designed around specific different taxonomies of a gamer behavior. Well, the same thing happens with users or, or employees or operators in financial services context. Advisors are interested in different things. Some of them aspire to outcomes, some of them respond to different things. So if you’re going to create a really compelling technical environment, that’s going to leverage your data really effectively, thinking through the incentives around how you do that and how you enable that and how you encourage that can’t be underestimated. If you want your users to embrace a particular tool, think about how you incentivize them to do that.
Craig: Yes. They should be thinking about that. Need to take a step back from your daily grind and from crises and pandemics, and really think about how you’re incentivizing people. Oh, one more thing I wanted to ask you about was how does the data enrichment change how you bring value to market? So this is something you mentioned earlier, if you understood the tool better you could do more. So can you explain how you help your clients with that?
Jeff: Sure. So maybe a compartmentalized way to describe it as if maybe if we think about that in terms of compensation. So if we were to wind the clock back, say five years, most of the conversations we’d be having with the market would be about how do we ensure that the breadth of products and to some extent the services, but primarily the breadth of products that our financial advisors are offering to the market can be compensated on adequately. And that would typically be in the form of some variation on revenue sharing, right? Which is simply the customer is producing a revenue stream and the advisor is getting a piece of it and the firm is getting a piece of it, and who’s supporting that business ultimately defines that split.
But today companies are thinking about it differently, they’re thinking about that data and how to enable the data in the hands of the advisor. And they’re starting to think about it in terms of, well, how do we understand how the customer is doing in the mix? Is the customer happy? Is the customer engaged? Do we have evidence of a longterm focus on that customer relationship? So it’s a smaller tactical example, of the area that you’re exploring here is how do we help our organizations? How do we help our customers take that breadth of data and turn it into something that can be practically used or practically enabled at the frontline.
So our compensation history sort of betrays a bias in that area, but you can certainly go beyond that and understand the importance of benchmarking understand the importance of forecasting and prediction to help prioritize areas of focus or areas of attention which doesn’t necessarily mean always addressing the underperforming. It can also be here’s an area where we seem to be getting outlier, positive performance. We should double down on that.
Craig: That’s really useful. I think that’s helpful for a lot of firms looking to organize their data better, especially around compensation and incentives and, and these types of programs. You know, I’ve got a lot more questions, but we’re at the end of our rope here for this particular episode, and I want to have you back so we can keep going because this has been really helpful. Jeff where can people find you and your company?
Jeff: We’re at Xtiva.com, it’s our website, and you can certainly reach out to us there or or on LinkedIn. The good news is Xtiva is a pretty rare name so when you Google us or search us on LinkedIn it pops up. And you can find me on on Twitter, @Jeff_ Marsden, on Twitter is not a bad way to reach me.
Craig: Awesome. Jeff, thanks so much for being here. I really appreciate your time.
Jeff: Thanks, Craig. Great chat.