By Fraser Jack, Co-founder and Director, Advice RegTech
One of the key points from ASIC Report 515 was the importance for AFSL’s to have Key Risk Indicator analytics on the behaviour of their advisers - but what does that mean in layperson terms. In this article, we open the lid on the field of Data Analytics and look at some of the buzz words, like; descriptive, predictive and prescriptive analytics, and what they actually are.
Data - the starting point...
We all know that as we transact more and more in the digital space, that a lot of data is generated and collected. Data by itself is largely meaningless, but when combined and with specific analytics techniques applied, we have a real opportunity to derive powerful benefits from it. Data is the starting point for a range of analytics, and the ones we will look at in this article are:
2. Predictive, and
3. Prescriptive Analytics
These three areas of data analytics are integral to designing, building and maintaining systems that make and support structured decisions. Welcome to the world of Decision Management. Analytics is about finding meaningful patterns in data – data analytics.
For AFSL holders keeping Key Risk Indicators for their Advisers is about identifying, capturing and organising data related to the behaviour of Advisers. Having data is fine, but what data concerning advisers should we collect? And, once we have it, what can we do with it, and what use is it?
Descriptive analytics - tells you what has happened...
Descriptive analytics simply ‘describes’ what has happened in the past based on data that was collected. This is generally the first and simplest form of analytics. We know something happened because we are able to link some, several, or many data points together. But why do you want to know what happened in the past?
AFSL holders are constantly required to make decisions, and by fully understanding the history of a situation can make better, more informed decisions. Descriptive analytics helps by organising and summarising the facts so that decisions are more accurate and reliable. That is fine if you want to make a decision about data and information from the past, but what if you want to avoid an undesirable situation from occurring and need to predict if something may happen – enter predictive analytics.
Predictive Analytics - tells you...what it likely to happen...
Predictive analytics is about taking the same data used to help in Descriptive Analytics, and then applies advanced algorithms and modelling techniques to help discover interesting and meaningful patterns in the data. This takes the power of data to the next level. Predictive Analytics is a data driven approach to decision making. This means that decisions are underpinned by objective, rational, factual inputs – and biased human opinions and flawed assumptions are removed, if not greatly reduced.
Predictive Analytics answers questions such as: · What is the likelihood…? · What is the expected…? · What is the estimated…? · What contributes the most to…? · What is most related to…? · Which product is a customer most likely to…?
Predictive Analytics uncovers not only what data will best help predict something, but also how well it may predict it. But what should you do with a prediction if it comes true? Wouldn’t it be nice to also identify the best course of action to take based on certain predictions - well you can by adopting a Prescriptive Analytics approach.
Prescriptive Analytics - tells... what could you do...
Prescriptive Analytics is about prescribing the best course of action to take based on a certain outcome – it is an approach to making more effective decisions. The Prescriptive Analytics approach combines outputs from descriptive and predictive analytics, as well as other technology areas such as machine learning, simulation and streaming analytics into decision models that improve the effectiveness of decisions. Prescriptive analytics is an important part of an organisation’s Decision Management Systems and the designing, building and maintaining of systems that make structured, efficient and objective decisions.
When you need to make a decision, you can draw on what you already know through the use of descriptive analytics - then apply various predictive analytics techniques to those insights, and gain an understanding about what is likely to happen in the future under similar conditions. Then by adopting a prescriptive analytics approach you can assign specific recommendations and courses of action for each potential projected outcome.
Is there a data analytics approach that can help ASFL holders address key risks associated with Adviser behaviours? Advice RegTech has developed a powerful prescriptive analytics tool for AFSL Licence Holders called KRIS, Key Risk Indicator Solution.
If you are interested in exploring a proof of concept set up specifically for your AFSL, please contact me at Fraser.Jack@AdviceRegTech.com to start a conversation.
Samantha Clarke, Co-founder Advice RegTech and delegate on the AICC Women Leaders innovation tour to Israel, June 2017.
What happens when 40 of Australia’s brightest leaders have the opportunity to meet with the leaders and innovators at the forefront of the startup nation of Israel?
Creative sparks ignite, spirits soar, curiosity and connections foster collaboration.
Handpicked leaders from corporate Australia, government, and home-grown startups formed the 2017 Women Leaders delegation led by Diane Smith-Gander and the Hon. Helen Coonan with the Australia Israel Chamber of Commerce (AICC) in June 2017.
Australian delegates spanned the banking and financial services sector, retail, energy, property, infrastructure, technology, government, education, legal, health, telcos, media, executive search, venture capital, incubators and startup founders.
The get-up-and-go of the Israeli leaders and startup founders fueled the imagination and courageous spirit of the Australian leaders on this delegation.
The solutions mind-set to boost our innovation ecosystem and womens participation, leveraged to solve the big problems for key sectors, drove the energy of the group. There was a spirit of collaboration to achieve game-changing outcomes for Australia by developing and supporting our startup talent through education, global connections and the support of Government and institutional resources to ‘kangaroo pouch’ i.e. incubate and mentor our startups. The collaborative discussions amongst the group will have positive ripple effects on the economy of Australia in the coming years, without a doubt.
Watch this space for more insights and outcomes from the talented group of Women Leaders on this delegation - contributing to creating the next wave of growth for our lucky country, harnessing the collaborative spirit within Australia, connecting with global partners:
Women Leaders Trade Mission to Israel - what I learned
Josephine Napoli | 12 Jun 2017
Israel, one of the world's greatest start-ups
Christine Yates | 13 Jun 2017
Touring the innovation nation - what I learned about startups and the entrepreneurial culture in Israel
Bernadette Conlon | 28 Jun 2017
The Lucky country and the start-up nation: a comparative analysis of venture capitalism Harriet Warlow-Schill and Shmuel Loebenstein | 26 Jun 2017
With characteristic chutzpah Israel creates a startup feeding frenzy
Juliett Bourke, Deloittes, published in AFR | 3 July 2017