Investors need to be more careful than ever about how they click, talk, and type. Investment banks are watching.
At a fixed-income conference in New York this week, executives cautioned that Wall Street firms are increasingly packaging up investor data, anonymizing it, then selling it — in some cases back to the buy side.
“We all need to be extremely aware that everything we do on the buy side — every voice conversation, every click, every phone call — is captured by the sell side,” Russell Budnick, JPMorgan Global Wealth Management’s head of credit trading in the US and Europe, the Middle East, and Africa, said at the Fixed Income Leaders Summit: Emerging Markets.
He said that investors “need to be very cognizant of tools” being not only used to improve their internal workflow but put into a customer relationship manager “to cover us better or to capture our data and predict what we’ll do next.”
“We need to make sure our processes are aware of that,” he said.
Read more:Hedge funds are spending billions to get an edge through access to satellite images and credit-card transactions. Now they fear a crackdown’s coming.
Asset managers are increasingly turning a variety of information into alternative-data sets, such as what types of customers have historically been interested in certain bonds.
Investors are also asking for more data on their own behavior — including quotes, trades, and other information — for their increasingly complex compliance needs.
“The sell side and the buy side need to have a conversation about data and ownership,” said Anthony Tassone, the founder of GreenKey, a communications platform. “If we back up a little bit, with the exposure to machine learning and data scientists, the sell side is hiring data scientists like they were developers 15 years ago. There’s an explosion of unstructured data at these institutions.”
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The comments echoed those made by Daniel Pinto, the JPMorgan co-president, who told Business Insider at the World Economic Forum in Davos, Switzerland, in January that while many clients like the analytics banks were providing around their own data, customers were uneasy about having their data shared with others.
“You need to be very careful to protect client privacy,” Pinto said. “A lot of clients don’t want their data used elsewhere, even in aggregate.”
One investment executive, who asked to remain anonymous, told Business Insider at the conference that his multinational firm was struggling with overlapping regulations around data and confusion around direction.
“Where’s our obligation? To shareholders? Regulators? Clients? The buy side might have assumed what they were doing was private, but who knows,” he said. “Nobody knows what to do. We’re all making it up as we go.”
- Read more:
- Investment managers are touting tech buzzwords like ‘big data’ and ‘AI’ to win business. It’s not working.
- $650 billion asset manager Franklin Templeton is embedding data scientists in a key investment team, and it’s a sign of how the industry is changing
- A $27 billion private-equity investor is betting a handful of data geeks will determine who wins the biggest deals
- Citigroup has found a new way to offer hedge funds obscure data that can give them an edge — and it’s part of a $2 billion investing gold rush
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