The Importance of Financial Data Visualization in Financial Planning
As a financial advisor, your clients rely on you to help them navigate the increasingly complex financial landscape. You need to be able to communicate your ideas effectively, whether you’re explaining a complex financial concept or relaying your client’s financial plan.
In today’s data-driven world, more people turn to data visualization tools to help them communicate their findings effectively, and, in the case of financial planners and advisors, foster a better understanding of their clients. These tools help you translate your data into a picture to make them easier to digest, such as graphs, charts, and mind maps.
Why financial data visualization matters
Financial data visualization becomes increasingly important in the finance industry. While advanced data analytics can give you a deeper insight into your client’s financial life, overly complex data sets can often confuse and overwhelm your clients when presented as is.
Using visualizations for your data provides clarity, prevents misinterpretations, and helps clients better understand the information they are being presented with. This is especially important as you’re trying to make them make an informed decision about their financial future.
In addition to improving communication between financial advisors and their clients, data visualization can also help financial planners identify financial trends and patterns — allowing more accuracy during the financial planning process. It’s also a great tool to help spot areas that require more attention, thus helping you anticipate and act quickly before it’s too late.
Benefits of using financial data visualization
Here are some reasons why you should visualize financial data.
Improved decision-making — Visualizations allow financial advisors to quickly identify patterns and trends in their data, leading to more effective analysis. Additionally, by presenting financial data to your clients in a format that’s accessible and easy to understand, financial planners can communicate their findings more efficiently, leading to better decision-making by the clients themselves.
Visual aids are even more important for complex decision-making processes, such as in a corporate setting. Within an enterprise, finance teams are usually responsible for accounting tasks, such as documenting cash flow, creating financial statements, and financial reporting. But they’re usually also responsible for forecasting and predictive data analysis. The insights from this process will inform decision-makers, such as the CFO, stakeholders, and the CEO, of
Better communication of complex financial data — For financial professionals who are used to processing huge amounts of complex financial data, understanding what the data is saying may not be that difficult. However, in most cases, it will be different for your clients.
While you can be patient and provide a detailed, comprehensive explanation to your client, this might only confuse them. On the other hand, conveying the information in an extremely concise manner without expounding too much on the hows and whys might make your information sound baseless and unreasonable.
This is where data visualization comes in. Your clients rely on you to simplify the data for them, in a way that they can understand and act on. Presenting the data in an engaging manner will make your strategies and plans more accessible – providing better actionable insights.
Increased efficiency in analyzing financial data — Visualizations enable financial planners and advisors to analyze large amounts of data quickly and accurately. This can help you identify areas for improvement and optimize financial strategies more efficiently.
Enhanced client engagement — By presenting financial data in an engaging and easy-to-understand manner, financial advisors can increase client engagement and satisfaction. Clients are more likely to engage with financial data when it’s presented in a way that is easy to understand and visually appealing, which in turn will help discussion and boost understanding.
Types of financial data visualization
There are several types of financial data visualization, and each has its own strengths and weaknesses. Some common types of visualizations are:
Comparison charts — These charts show the relationship between two or more sets of data, often with the goal of highlighting differences or similarities. They are useful when comparing financial performance between different time periods, companies, or investments.
Trend charts — These charts, on the other hand, show changes in data over time. They are often used to track financial performance over a period of months or years, allowing financial advisors to identify patterns and make informed decisions.
Distribution charts — They are used to show how data is spread out over a range of values. They are often used to display financial data such as income or expenses.
Correlation charts — As its name suggests, correlation charts show the relationship between two or more variables. They are used to identify patterns or relationships in financial data, such as how changes in interest rates affect stock prices.
Hierarchical charts — These charts show the relationships between different elements of a financial system, such as a company's organizational structure or the breakdown of expenses in a budget. They can be used to identify areas of inefficiency or opportunities for improvement.
Geographic maps — Data presented in these charts is used to show financial data in a geographic context, such as the distribution of sales across different regions or the impact of economic events on different countries or regions.
Best practices for financial data visualization
Visual representation is a powerful tool for communicating complex information and insights. However, to make the most of this tool, it is important to follow best practices for effective visualizations. Here are some key tips to keep in mind:
Keep it simple: Use simple, clear visuals that are easy to understand.
Use the right type of visualization for the data: Depending on the type of data, you may need different types of visualizations. Use the right type of chart or graph that best fits the data you are presenting — whether that be simple pie charts, comparison charts, dashboards, or something else entirely. Start with knowing the goal of the visualization — what information do you want to share? Is there a specific metric or KPI that can help you do so?
Use colors effectively: Colors can be a powerful way to highlight important data points and add visual interest to your visualization. However, it is important to use them sparingly and effectively. Use contrasting colors for clarity, and avoid using too many colors or shades that are too similar.
Label your visualizations clearly: Ensure that all visual elements of your data visualization are clearly labeled, including axes, titles, and legends. Clear labeling will make it easier for viewers, or your clients, to understand and interpret your information.
Provide context to your visualizations: It's important to provide context and background information that can help clients understand the visualizations better. This can include labels, annotations, and explanatory text.
Choose the right tools: There is a wide range of tools available for creating financial data visualizations, including specialized software and online platforms. Choose the tool that best fits your needs and skill level to create the most effective visualizations possible. Invest in tools that can connect with multiple data sources and eliminate data silos to make sure your visual representations are accurate.
By following these best practices, you can create financial data visualizations that effectively communicate important insights to your clients.
What are tools for data visualization?
There are many different tools available to help financial planners and professionals create effective visualizations, each with its own functionalities. Some popular data visualization software include:
Microsoft Power BI: A business analytics service that provides interactive visualizations, real-time updates, and business intelligence capabilities.
Microsoft Excel: A versatile tool that can be used to create basic visualizations such as charts and graphs.
Google Sheets: A free, cloud-based spreadsheet program that can be used to create basic visualizations.
Asset-Map: A platform that allows financial advisors to create user-friendly visual maps of their clients’ assets and financial plans.
Morningstar: A service that offers a suite of tools that allow investors to analyze and visualize data on stocks, mutual funds, and other investments.
Tableau: A powerful data visualization tool that allows users to create interactive dashboards, charts, and reports.
When choosing a tool to visualize your data, it's important to consider factors such as ease of use, data compatibility, and cost.
Keep in mind that the type of visualization should be appropriate for the intended audience and the kind of data being visualized. By selecting the right tools and following best practices, you can create clear, informative visualizations that are accessible to your clients. This bridges the gap for clients — between understanding financial information and making informed decisions.
Upgrade your data visualization with Asset-Map
Presenting information in a visual way allows a clearer understanding of the complex financial data for your clients, minimizing data misrepresentation — ultimately leading to improved decision-making.
Besides being an excellent tool to communicate your findings, data visualization can help you spot trends, patterns, and outliers that may not be apparent when looking at raw data.
While you can do this in Excel spreadsheets — and you might be surviving just fine with those — Asset-Map’s specialized features can help you do more with your visual maps.
Impress clients from the get-go with our user-friendly discovery tool and keep your client data up to date wherever you go.
Get your demo today to see what else you can do with Asset-Map’s visualization features.