Information and communication

Client reporting makes an impression on your clients everyday – even more than your portfolio managers or client relationship professionals do. Client reports linger on desks, are passed around the office, and are the visual materials that provide the rationale for investment decisions made on the investors’ behalf.

The investment management industry thrived for over 150 years based on the notion that investors do not have the time, knowledge, or inclination to manage money and that they are willing to pay experts very well for their advice. In the past eight years, market volatility, regulatory change, and shifting investor expectations have questioned and eroded opaque industry practices. These factors are pressuring investment managers to change as poor, outdated and, at times, inappropriate operating practices are exposed. This exposure is inviting new thinking and changing old assumptions about client behavior and expectations, as well as what the leading operating platform and processing practices should be, including client reporting and communications.

Investors are demanding more and firms who respond with better and more targeted services will win

Today, investor expectations are redefining what constitutes great service from their investment professionals. Investors are wiser. They understand they have investment options, from the type of accessible products they can purchase to the managers they hire to manage those investments. They want more personalized products and targeted services to meet their specific financial objectives. They expect to access their investments and accounts anytime and anywhere with up-to-date accurate information put into the context of personalized communications. These expectations are driving a massive change in how investment firms structure their client facing activities. Firms that rally early and align their information delivery and communication methods to the new investor expectations can realize significant competitive advantage. Clients may not want to pay for a high-touch experience, but will certainly embrace it – if and when available. 

Firms that rally early and align their information delivery and communication methods to the new investor expectations can realize significant competitive advantage.Jackie Alvarez, Principal, Investit, Intelligence Research

Investment managers are reassessing their client engagement offering

These shifting expectations are a catalyst for investment management firms to assess their client engagement strengths and weaknesses and adjust their offering to align with changing investor expectations. Information delivery and communications are fundamental to that alignment. Today, 90% of investment managers have moved to distributing knowledge and investor-focused content while reducing the use of glossy standard brochures dedicated to describing their company. With the focus on insightful and personalized content, investment firms are showcasing their strengths and how they are delivering value in achieving their client’s investment objectives.

Today, 90% of investment managers have moved to distributing knowledge and investor-focused content while reducing the use of glossy standard brochures dedicated to describing their company.Jackie Alvarez, Principal, Investit, Intelligence Research

Client reporting excellence creates competitive advantage

The last ten years have been difficult for both investors and investment professionals. Persistent market volatility and many quarters of less than optimal performance have fuelled a collective unease. Investors, in search of returns, add new asset classes to their portfolios, want greater transparency in assets held, and demand more insight into how an investment manager is bringing value to their financial relationship. This has encouraged investment managers to develop a more value-based relationship with their clients.

Responding to these changing dynamics has been a catalyst for investment firms to reassess each touchpoint with their clients. Today, a firm’s success relies on enriching their investor’s experience by tailoring services and customizing all deliverables for all investors in all markets. Investment management firms need to be more pro-active, communicate more frequently, and provide even more clarity than in the past.

Investors’ expectations are also influenced by new technologies that can ease access to their investment information. Combining innovation in financial products with innovation in investor reporting and digital communications creates opportunities for investment managers who are eager to lead the industry. Targeted knowledge content, personalized reporting, self-service portals, social media and mobile applications, are all tools that can help create greater investor loyalty and drive brand recognition. 

Targeted knowledge content, personalized reporting, self-service portals, social media and mobile applications, are all tools that can help create greater investor loyalty and drive brand recognition.Jackie Alvarez, Principal, Investit, Intelligence Research

Today, providing customized investor reporting is a requirement, not an option

New client demands driven by market events and the availability of mobile and social technology is shifting the client reporting platforms from being information delivery focused to more communication delivery focused; from hardcopy to digital delivery; from standardized to personalized content.

Satisfying the client demand for personalization is complex. Reporting requirements can diverge across the typical client base and associated mandates. In a survey conducted by Investit on client reporting in the autumn of 2016, 64% of firms experienced an increase in customization requests for Accounting Packs; 78% of firms experienced an increase in customization requests for Investment Reviews.

This pressure for personalized reporting has led 93% of investment firms to customize reports for their clients and adjust their servicing approach. 33% of investment managers are giving their clients whatever reporting the client needs and 47% are tiering their reporting service based on the strategic importance of the client.

For investment managers to respond to the reporting needs of diverse investors and mandates requires that managers understand the specific needs of each client/investor while also investing n systems and processing that enables efficient and sustainable report production practices.

Impediments to success

In the past, firms have invested less in client reporting platforms than in other areas of their business. This has exposed client reporting platforms as an operational risk area as the firm adjusts to the production of personalized reporting. Two key characteristics of existing platforms are of greatest concern: scalability to take on new report requests and automating the production of those requests without manual intervention.

Two key characteristics of existing platforms are of greatest concern: scalability to take on new report requests and automating the production of those requests without manual intervention.Jackie Alvarez, Principal, Investit, Intelligence Research

In client reporting, scalability refers to the ability for the production processes, which include operations and technology, to handle increased demands particularly important during peak processing periods at month-, quarter- or year-end.

Automation is used to describe the technique, method, or system of operating or controlling a process by highly automatic means, as by technology, and reducing human intervention to a minimum. The term frequently used in investment discussions is “straight-through-processing.”

The Investit 2016 survey on client reporting revealed that 50% of investment firms are manually intervening in the production of over 50% or more of their monthly reports. For these firms, it is difficult to increase production without adding new staff resources to manage the increase in manual report creation. Today, over 77% of Investment Reviews are still done between the 15^th and 20^th business day. In an era of digital technology and straight-through-processing, investment firms still struggle with producing custom reports before the 15^th business day.

The Investit 2016 survey on client reporting revealed that 50% of investment firms are manually intervening in the production of over 50% or more of their monthly reports.Jackie Alvarez, Principal, Investit, Intelligence Research

Of those firms surveyed in the autumn of 2016,

• 43% of firms do not believe the production process is scalable for Accounting Packs and 65% of firms do not believe the production process is scalable for Investment Reviews.
• 46% of firms indicated their process is not automated enough for Accounting Packs and 29% indicated Investment Reviews are not automated enough. 

Invest in your clients

For clients looking for greater clarity on their investment activity, the importance of a strong value-based relationship with their investment management team is taking center stage. This value-based relationship begins with asking the investor what they need to succeed and delivering it to them in the way they need to see it. The foundation of this value-based relationship is a combination of tailored services, customized deliverables, flexible and proactive engagement, and responsiveness.

Tailored services and customized deliverables begin with the client reporting and communication platform.Jackie Alvarez, Principal, Investit, Intelligence Research

Tailored services and customized deliverables begin with the client reporting and communication platform. It is the conduit for investment managers to position their investment excellence and a key decision factor for the investor when selecting their investment managers. These expectations are transforming the foundation of the manager-client relationship and shaping the future client reporting platform as a flexible, automated, user-friendly, and accessible tool. Firms who still believe that aging reporting platforms designed to support client expectations from a previous era will struggle to maintain client confidence and engage new clients. For those firms, it is time to rethink, restructure, and refine their client reporting systems and program, and to recognize the enormous impact client reporting has on the longevity of client relationships. 

About the author

Jackie Alvarez

Jackie is a Principal in Investit’s Intelligence research practice and brings over 25 years of experience in the financial services industry. Her areas of focus include client-facing technologies including reporting, information delivery and communications, data management and governance, and emerging technologies such as blockchain, artificial intelligence and machine learning. Recently, she has authored research papers on “Digital Disruption: Sales and Marketing”, “Client Reporting: Next Generation Platforms”, “Enhancing the Client Experience”, and “The Allure of Blockchain”.

Prior to joining Investit, Jackie was Managing Director at Cutter Associates responsible for the Benchmarking program. She also spent four years in the Cutter Research division covering risk management, fixed income portfolio management, performance & attribution as well as data quality, client reporting & business intelligence. Prior to Cutter, Jackie was head of the Russell Mellon Analytical Solutions where she managed their global information delivery and reporting platform and the investment analytics data programs. She also founded a consulting company and held senior management positions at Acumen International and SunGard.