Reducing Market Data Costs – How Wealth Managers can Benefit from the Cloud

First Published Wednesday, 11th April 2012 02:30 pm from Xand : John Neff

The opinions expressed by this blogger and those providing comments are theirs alone, this does not reflect the opinion of Automated Trader or any employee thereof. Automated Trader is not responsible for the accuracy of any of the information supplied by this article.

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src="http://cdn.xignite.com/blog/04_09_12/cloud_money_v2a.jpg"

alt="" width="200" height="150" />In today's environment of

shrinking margins, it's incumbent on wealth management firms and

RIAs to ensure that they're optimizing the value they receive

across all vendor relationships. Market data expenditures, which

represent a substantial slice of ongoing operating expenses for

advisors, are no exception.

At most firms,

market data is accessed within desktop terminals and Microsoft

Excel. Firms will often have to pay a steep annual fee for

terminal access, with extra charges incurred to access the same

data within Excel via an Excel add-in.

While

vendors have added a wide range of datasets to their terminals

over time, that data comes at a price. Subscription costs for

industry-leading market data terminals can run anywhere from

$5,000 - $20,000 per user per year.

This

one-size-fits-all pricing structure is expensive and not terribly

customer friendly. Traditional market data terminal pricing

structures fail to account for the fact that:

Many users only require access to a limited
range of datasets
Many users only require a
limited overall quantity of data
Terminal
subscriptions are often underutilized due to personnel

turnover

Market data is also

often required for a wide variety of internal applications,

including proprietary research portals, quantitative modeling

software, portfolio accounting systems, and client reporting

systems. This typically requires a separate datafeed licensing

agreement, and a complex data management system involving data

cleansing and parsing, databases servers, network infrastructure,

and ongoing system maintenance. The overhead required to keep

these data management systems running smoothly can often cost

more than the data itself.

How

the cloud can help wealth managers reduce market data

expenses

There's been a

considerable amount of buzz about the cloud in recent months, and

that buzz is now extending to the wealth management industry and

how the cloud can help firms extract more value from market data

relationships. New cloud technologies are transforming the market

data landscape, enabling firms to reduce operating costs and

complexity and place greater focus on servicing their

customers.

There are two important factors

where cloud-based solutions have an edge over traditional

solutions:

Simplified delivery - A
cloud-based market data solution delivers data via sophisticated

web APIs that can be easily integrated into any internal

application. This enables firms to bypass costly infrastructure

and maintenance headaches, and quickly incorporate market data

with just a few simple lines of code everywhere it's needed,

including Microsoft Excel.
On-demand pricing - In
contrast to a flat fee, cloud-based market data is priced by

actual usage. This means that users only pay for the data used,

which for the vast majority of firms means lower market data

costs.