WM Market Reports
Must-Have Reporting Capabilities for Modern Wealth Managers Chapter 2

This is the second chapter of a major research report issued by this news service about client reporting.
Clients’ reporting preferences are as unique as investors
themselves, leaving wealth managers balancing a range of
competing requirements as they build their capabilities.
Approaches differ, but there are several must-have features
experts say firms need to offer today.
This feature forms part of WealthBriefing’s new research
report,
“Client Reporting – Regulatory Burden or Client Engagement
Tool?”, produced in partnership with Computershare
Communication Services. (See
the previous chapter here.)
Wealth managers are all at different stages in their
digitalisation, with each having their own investment and client
servicing style. The reporting ideal differs commensurately from
firm to firm. Yet the expert - and end-client - contributors to
our latest research report have identified several must-have
reporting capabilities for modern wealth
managers.
Omni-channel excellence
Currently, in the words of James Day, Managing Director of
Peritus Investment Consultancy, “firms’ delivery methodologies
for reports vary widely between hard copy, PDF, encrypted or not
encrypted and online access”. Yet a host of spurs to investment
in digital delivery channels are in play, not least the hike to
printing costs caused by the more regular reporting mandated by
the second Markets in Financial Instruments Directive (MiFID
II).
“For most clients, but particularly the millennial generation,
being able to easily access not only their portfolio values and
composition, but also information about performance, is becoming
increasingly important,” said Emma Bennie, Head of Discretionary
at Saunderson House. “As such, having an online portal is now a
must-have for wealth managers.”
The security benefits of portals over emailed reports are also
clear, although it must be conceded that clients can find the
added authentication layers to be inconvenient. “The trouble with
the portal is that it’s a bit of a pain to go into,” said Client
C, a £2.5 million ($3.2 million) investor in their forties
interviewed for our research report. “I trust biometrics and I
think I would use an app very much more often.”
Our expert panel generally agreed with the assertion that “people
increasingly hate paper and paperwork” made by Dr Ariel Sergio
Goekmen, member of the executive board at Schroder & Co Bank.
However, they also said it must be recognised that sometimes even
very tech-savvy clients have a strong preference for paper when
it comes to documents warranting serious attention.
Age is not necessarily an accurate predictor of preferences, either. For instance, one very sophisticated client in their 50s interviewed for this report was adamant that they wanted to continue receiving printed packs that they could read with a partner over coffee. Meanwhile, another in their 70s said: “I’m actually not happy with getting hard copy as all my filing is online. What am I supposed to do with all this paper?”
Storage and environmental concerns are clearly driving demand for
digital reporting, across the generations, alongside the appeal
of greater customisation and drill-down capabilities. “Silver
surfers have the time to get quite granular on their portfolios
and clients generally get great comfort from knowing the
capabilities are available,” said Lee Goggin, co-founder of
online matching service findaWEALTHMANAGER.com. “It’s the same
for real-time reporting: most discretionary clients wouldn’t want
to be logging in all the time, but when they want an update it
needs to be right there.”
Frictionless user experiences means that app development
continues apace, but the help client portals afford in
systematising client communications more broadly means this is
where many firms are focusing.
“Clients increasing want all their documents stored in a place
online where they can access them anytime,” said Scott Stevens,
head of business development at Quilter Cheviot. “Not only can
you deliver client reporting through your portal, you can also
use it as a facility to store correspondence and a conduit for
delivering marketing messages.”
The direction of travel is certainly towards digital reporting,
with wealth managers aiming to make great strides in recent
years: WealthBriefing research has found that wealth
managers are targeting 89 per cent digitalisation by next year,
this having stood at 69 per cent in 2016. Yet multi-channel
delivery is likely to be the reporting reality (for traditional
wealth managers at least) for some time yet.
This, our experts said, makes it imperative that portal,
paper/PDFs and any mobile apps are perfectly synchronised in data
terms, while also being unified in look and feel. As Chris Brown,
wealth management and private banking sector head at
Computershare Communication Services, pointed out, continuity is
vital, not least in ensuring advisors and clients are seeing the
same thing when discussing portfolios.
“Many clients may be quite ‘hands-off’ but if they have spare
moments while they are sitting in a departure lounge, for
instance, that’s when they’ll want to check in on their
portfolios,” said Brown. “Investors want to see quickly that
everything is on track, rather than waiting ages for a report to
download which is then very hard to decipher - timeliness and
consistency are two key things they are looking for.”
Deep customisation capabilities
Although a preference for paper may endure among some clients,
digital is clearly the more elegant approach to giving clients
the customised views of portfolio performance they desire. As
pointed out by Tim Tate, head of customer experience, Barclays
UK, firms have to cater both to “those who thrive on detail and
those who have little tolerance for it”.
It is also difficult to predict preferences, as Dr Ariel Sergio
Goekmen explained: “There are very wealthy clients in the UHNW
segment who still prefer to receive simplified calculations.
However, at the same time, there are many clients who studied
finance themselves - or are advised by professionals who did -
and want to see statistical measures and evidence.” In reality
then, creating a one-size-fits-all model for paper-based
reporting is likely to be an impossible task, no matter how
homogenous a firm’s client base seems to be.
Several end-clients interviewed for this report complained that
their hard copy reports were often very much line-by-line
accounting style and lacking visual representations – something
which seems to be down to the difficulty of deciding how much
detail to offer as much as the practicalities of doing so. “If
you start to report portfolios in data terms, you end up with an
awful lot of paper, very quickly,” explained Tate. “And, while
graphs obviously allow you to deliver easy-to-digest information,
often, when you consolidate that type of information into a
graph, you lose a lot of the detail.”
As Tate observed, “digital reporting allows you to start with the
high-level views and offer customised drill-down capabilities as
required” so that clients are neither overwhelmed with detail nor
left with unanswered questions should they wish – even as a
one-off – to get really granular on their portfolio’s composition
and performance.
However, he cautions that wealth managers need to make sure their
systems are really up to the customisation challenge or risk
disappointing client experiences that are perhaps worse than
offering none at all. “When you start to allow people to drill
down into complex portfolios, you’re getting to a level of detail
that is really hard to render,” Tate explained. “You can only do
that if your data is strong enough and flexible enough to make
that happen very quickly, or you end up with slow delivery and
what should be a great digital experience ends up being a very
poor one.”
Adjusting clients’ reporting preferences at review meetings will
generate valuable discussions and is proof positive of bespoke
service. Yet Tate believes the industry should be moving towards
clients customising how reporting information is presented
themselves – although not “from scratch”, however – as
institutions should know their customers well enough to have a
good understanding of what they want and need to know, in his
view. “It's the final 20% which needs to be customisable by the
client, but that’s the part which is always going to be very
difficult to deliver,” said Tate. “Full customisation of views
requires the data underneath it to be really granular, easy to
mine and easy to surface – that, with legacy infrastructure,
continues to be a challenge across the industry.”
The scale of this connectivity challenge is made clear by the
findings of WealthBriefing’s Technology
and Operations Trends report
for 2018, which found that almost half of wealth managers
globally are using four or more systems to construct, manage,
monitor and report on investment portfolios, and a fifth upwards
of six.
Personalising performance metrics
Investor interviews carried out for this report confirmed that
performance comparisons are a frequent source of dissatisfaction
and an area where there is great potential for wealth managers to
differentiate themselves via customisation capabilities.
“Generally, my portfolio reporting is very good, particularly on
the tax aspects, but I’d go so far as to say the benchmark
comparisons are actually poor,” said Client B, who is in their
forties and has £1 million to invest. “I get very little sense of
how I’m doing since I started and how the performance compares to
what I could be getting.”
Clearly, customisation in benchmarking is beset with the same
technical challenges with data feeds, systems connectivity and
how to present information that can complicate customisation
generally. However, the question of how to compare performance
most meaningfully is itself highly nuanced, meaning that
flexibility is crucial.
As our experts pointed out, clients often have a preferred
benchmark in mind which may be very different to the “official”
one agreed as most appropriate to their portfolio. Well-known
stock indices are often taken as proxies for economic growth and
therefore what performance “should” be, thinking that has
doubtlessly been reinforced by the growth of market-tracking
ETFs. It also needs to be noted that several of the clients
interviewed for this report are somewhat cynical about benchmarks
generally, and in particular composites, believing that these
allow firms to present performance favourably.
Demand for greater transparency seems to be making clients
increasingly keen on seeing external benchmarks comparing the
performance attained with typical mandates firm to firm, of which
there are several available in the UK. Several interviewees had
also long desired performance to be presented net – a preference
that MiFID II reporting will surely entrench. “The only way to
make performance transparent is to show it relative to peer
group, so I know it’s not a meaningless benchmark the firm can
always easily beat,” said Client A, a £10 million investor in
their fifties. “I’m also not interested in gross performance,
only my gains after all fees and costs.”
These capabilities seem to be increasingly seen as
non-negotiable. “We believe that, as a minimum standard,
performance should be shown after all costs and charges, and in
absolute and relative terms against appropriate comparators,”
said Bennie, noting that peer benchmarks are particularly
reassuring.
Allowing clients to make a broad range of comparisons is
evidently a key way to promote trust, provided that any possible
limitations are adequately understood. Clients also need clarity
over costs when they may be perceived as a great drag on
performance (they are certainly encouraged to be seen as such by
the mainstream media). Here again, scope for an educational
element to reporting seems vital.
In fact, Greg Davies, head of Behavioural Science at Oxford Risk,
believes that benchmarking is generally a missed opportunity for
education, engagement and reassurance which could really boost
satisfaction levels if a better understanding of risk-profile and
psychology were built in.
“Instead of benchmarks, we should perhaps be showing clients
‘bench funnels’ detailing a range of performance comparison
points appropriate for the risk level they’ve signed up to,” he
said. “That way the client can understand better why their
low-risk portfolio should underperform an equity index benchmark,
for instance.”
Looking even further ahead, Davies believes there could be great
merit in clients’ financial personalities and behavioural make-up
driving the format and frequency of reporting. “At a basic level,
people who display low composure should be shown higher-level
information less frequently than someone of high composure who is
less worried by the ups and downs of the market,” he said. “You
could also change the visualisations to reflect whether the
person is more absolute or relative in their performance
thinking.”
In essence, Davies believes that anything a wealth manager can
measure about a client should be reflected in how they are
reported to. “Good reporting is personal, not universal,” he
said. “It needs to reflect the person’s risk profile, their
current circumstances and all the other aspects of their
financial personality – that’s got to be the direction of travel,
but the industry has a lot of work ahead to get there.”
The flexibility imperative
As our expert and client contributors made clear, meeting the
expectations of a diverse set of investors across a range of
delivery channels is a weighty challenge. That the reporting
demands of clients (and regulators) continue to rapidly evolve at
a time when many firms’ digitalisation is still very much a work
in progress means that flexibility should be the watchword of
both wealth managers and technology vendors, according to
Brown.
“Wealth managers need to decide whether they will be driven
mostly by ease of production or their client focus,” he said.
“Having recognised that it has to be the latter, the question
then becomes ‘What do clients want and how can we deliver that in
as cost-efficient manner as possible?’”
In addition to mass customisation, firms also need to be prepared
to implement deep customisations to attract and retain key
clients. “If the client asks for a specific solution, and they
are big enough to warrant it then it simply has to be programmed
in,” added Dr Ariel Sergio Goekmen. It seems that technical (and
cost) barriers to this responsiveness may all too often
intervene, however.
As Brown observed, wealth managers can often find themselves
facing substantial bills from technology providers for even
fairly insignificant changes to logos and the like, so it is
hardly surprising that more impactful changes get put off.
Vendors therefore need espouse the same client-centric approach
as wealth managers and recognise that they want better, more
customisable reporting, but without the expense that
re-platforming - or rigid solutions - will entail.
“We don’t have any hard and fast rules about how our system
integrates with clients’ existing ones, or how our output works,”
he said. “For us, it’s all about delivering what’s fit for
purpose for each organisation and then giving them the
flexibility to make further changes in a cost and time efficient
way – ideally by themselves, or through a managed service from us
for more complex development.”