Superannuation funds forming research relationships with outside entities isn’t a new idea. But Colonial First State’s five-year partnership with University of Technology Sydney (UTS) is not only yielding new technologies and new applications of data to better understand behaviours and outcomes by customers, it is developing new talent for the investment management industry.
“As analytics has become increasingly important as a strategic imperative for businesses it was evident that we needed to build out our analytics maturity, to move beyond just diagnostic ‘what happened and why’ to a level of analytics where we are leveraging all of the data available to us in sophisticated data mining and machine learning approaches,” said James Brownlow, national manager analytics and business intelligence at the Commonwealth Bank, which owns wealth manager CFS .
This idea sparked the partnership between CFS and UTS, which and has a specialty in data science, that Brownlow said was designed to “enhance our internal analytics capability, support [financial] advisers, and gain an improved understanding of our customers and our business.
“Collaborating with a university offered a win-win approach and a longer-term engagement with more innovative academic research based outcomes, compared to the traditional vendor-relationship with consultants.”
CFS began the five-year partnership with UTS in 2016, with the project using the wealth management group’s in-house data to analyse customer and adviser behaviours.
“Primarily our activity to date has been focused on the research rather than its application,” Brownlow said.
“That said we have been able to apply our enhanced analytics capability in a number of areas of the CFS business including marketing, distribution, product, and client operations. Moving forward we intend to differentiate our product development and our service delivery based upon an improved understanding of our customers and advisers.”
Brownlow cited UTS’ commitment to community involvement and collaboration with industry.
“The collaboration has opened up a new talent acquisition channel to both attract and retain top calibre analytics talent,” he added.
Currently, three full-time CFS employees are participating in the UTS Industry Doctorate Program, Brownlow said. Each employee is undertaking PhD research of Analytics with theses based on superannuation challenges such as financial literacy, advice participation, and superannuation engagement.
The collaborative arrangement also operates bespoke training, internship, contract research programs and keystone research, such as the recently awarded three-year Australian Research Council Linkage Project, which will focus on applying big data approaches to CFS data to better understand the behaviour of superannuation investors around longevity risk.
“Extant academic research is scarce, and what exists is primarily qualitative and driven by small scale surveys or interviews, with more simple traditional statistical analyses,” Brownlow said. “Our research will be the first application of sophisticated data analytics and machine learning techniques to understand customer behavior and outcomes.”
The benefit of using predictive modeling and machine learning is that it can aid CFS to observe behaviours and patterns that are “not easily discerned,” Brownlow said.
“Such behaviours and patterns can be disadvantageous for customers and their future retirement funding – such as adequacy or longevity,” he said.
“Once we have identified these things, we can then predict customers most at risk from these behaviours or likely to exhibit them and we can then work with customers and their advisers to circumvent or mitigate such behaviours from occurring.
“Practically, that may mean we have a better understanding of what poor reactions are at critical decision making moments in a customer’s superannuation lifecycle.”
Ultimately, CFS believes that the combination of customer-centred product design and high end data analytics will result in CFS being able develop products and services that demonstrate an “outstanding” understanding of the custemr and their advisers, Brownlow said.