This is another segment of a major new research report about wealth management and client reporting.

Technology is developing at a dizzying speed in all areas of wealth management operations, so while many firms may still be wrestling with bringing their client reporting up to date they also need to keep future capabilities in mind. According to industry experts, the cutting-edge is looking very sharp indeed. 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.)

The wealth management industry’s exponential pace of digitalisation is in response to compliance, cost and competitive pressures which continue to mount. Technology is also advancing at a staggering pace in all walks of life, making it difficult to predict exactly where client reporting is heading long term. There are, however, several areas where the direction of travel is clear, industry experts say. 

The central argument of this paper is that reporting is all too often a missed opportunity to really engage investors on their wealth journey and recreate the slick, customisable client experiences they have come to expect from other sectors. Another key theme is the need to educate investors better so that their expectations are set correctly and they fully appreciate the value their wealth managers are adding. Value for money continues to be top of the agenda for regulators and clients alike. 

Achieving these aims simultaneously is no easy task when simply piling investors with more and more information is likely to turn them off completely. Good reporting therefore demands the intelligent use of data, so that it is presented in an engaging, meaningful way, appropriate to the level of interest (and knowledge) the investor has.

Visualisations becoming vital
According to our panel of experts, improved data visualisations should be a priority, not least because “show rather than tell” is likely to be a far more effective way in for clients contemplating fairly complex investment principles. “The industry could massively boost clients’ comprehension of performance and risk if, instead of static charts, firms used animations to show investors how they think a portfolio might evolve, or how it has done over time,” said Greg Davies, head of Behavioural Science at Oxford Risk. 

Emma Bennie, head of discretionary at Saunderson House, agrees that investor education should be a priority for the industry to help raise standards as well as to stave off regulatory censure (this thinking has led her firm to produce written guidance for investors on the minimum reporting standards they should insist upon). 

She said: “Many investment professionals assume clients have a good grasp of the link between risk and return, however, we are not sure how many fully do.

“Firstly, there must be a common understanding of what is meant by risk.  Is it the risk of losing money in absolute terms, underperforming a benchmark or not meeting financial objectives?  Unless the client and the wealth manager are clear on this, it is impossible to explain, and give context to, the performance of the portfolio.”

In the words of Chris Brown, wealth management and private banking sector head at Computershare Communication Services, “clients’ needs are changing”, making interactive, engaging and client-centric interactions a crucial differentiator of the (very near) future as the biggest wealth transfer in history gets underway. And, as Richard Charnock pointed out, for the next generation of clients the context of performance may very much cover ethical considerations that make portfolio drill-down capabilities essential. 

Yet enhanced reporting is not just about wooing the next generation, but improving investor engagement across generations right now. As our panel observed, it can be all too easy for the aspirational “point” of professional wealth management to get somewhat lost amid all the processes and paperwork clients become bound up in. Portraying performance in relation to clients’ financial objectives should perhaps be a priority for every type of firm. 

According to Scott Stevens, head of business development at Quilter Cheviot, the quest to better engage with clients will see basic financial planning tools “increasingly incorporated into the wealth management armoury…not necessarily to compete with advisors, but to make things more interesting”. “The gamification of investing is key to engagement,” he continued. “Rather than just bare valuations, we should be allowing investors to plot how they are doing against their long-term objectives and really see where they stand on that journey, now and in five- or ten-years’ time.” 

Here, it should be noted that some wealth managers have already embraced gamification wholeheartedly. London-based Seven Investment Management actually had its highly successful financial planning app, 7Imagine, designed by games developers, for instance. Elsewhere, big banks’ innovation labs have been experimenting with Virtual Reality portfolio visualisations to bring asset allocations to life. 

Enrichment via AR
VR reporting capabilities may be a long way off, but enriching reports via QR codes and Augmented Reality are certainly within reach (Quick Response codes are a type of 2D barcode providing easy access to information through smartphone scanning; AR is a technology that superimposes computer-generated images on a user's view of the real world). And – as with mobile apps – client demand could rapidly drive development. QR codes may have achieved only muted success in their first wave due to being slightly ahead of their time, but now camera functionality and smartphone usage are catching up. The growing popularity of Messenger Codes, Snapcodes and the like are set to make code-scanning as natural as fingerprint scanning. Similarly, fun camera filters and games like Pokémon Go have made AR familiar and paved the way for the technology to be used in more serious contexts.

Although it would be tempting for overstretched institutions to see such innovations as gimmickry, our experts warned this may short-sighted. “It’s easy to dismiss new technologies, only for something to suddenly bring it right into the mainstream of client acceptance and then demand,” Brown said. “The future of the industry is going to be around multi-faceted digital interactions, which is why we’re evaluating HTML5 reporting seriously now. The way AR helps bridge the physical and digital worlds means it has an important place in our roadmap.” (HTML5 is the latest and fifth major revision of the code that is used to build web pages, which will include the ability to draw or embed graphics, audio, video and interactive documents.)

As he explained, these tools make it possible to create “hybrid” reports which cater for some clients’ preference for paper while also making them more interactive by overlaying digital content. Adding quick access to video commentary could be one powerful way to bring reports to life and contextualise investment performance. For most investors, watching a short video in spare moments is clearly far preferable to reading many dense pages of commentary and several institutions have told WealthBriefing that mobile viewing of this content has become significantly more popular in recent years. 

Perhaps even more importantly, our experts pointed out that good reporting calls for the wise use of “white space”. Davies therefore sees AR enrichment as having great potential to better inform investors and offer more portfolio visualisations while not overloading them. “A good behavioural design principle is to start with high-level information and allow people to dig deeper as they wish, whereas all too often organisations try to put every number they can on a page,” he said. “AR could be a great way to make reports more engaging without cluttering them up.”

Closing the loop with CRM
The wealth management sector has long recognised that personalised service need not rest solely with people, and that digitalisation plays a key role in institutionalising client relationships. Delivering customisation at scale and ensuring clients feel deeply understood by the organisation, and not just their relationship manager, clearly serves a variety of strategic aims. Closing the loop between reporting and client relationship management systems will therefore be a vital next step, according to our expert panel.

For Brown, digital reporting represents an unmissable opportunity for wealth managers to understand their investors’ interests and concerns in real time, and so capture insights that can greatly increase both client satisfaction and a share of the wallet. “Tracking what your clients are looking at on their reports and your wider digital real estate in combination could be exceptionally powerful,” he said. “They could be looking at their funds’ performance very closely, which might signal they are a client at risk; or, they could be looking at ISA products when you know from their fact-file that they don’t hold one with you.”

As Brown argued, this kind of intelligence produces ready-made agenda items for discussion (and sales opportunities), along with invaluable opportunities to help fill knowledge gaps. “It might be that your client uses a hover-over explanation of SIPPs’ key features, signalling the need for client education there,” he said. “It also goes without saying that being able to prove a client has extensively consumed content about a product can help reduce compliance risk.”

Automated data flows will be key to making these loop-closing interactions work, cautions Brown, since simply flagging interest or concern isn’t enough when advisors are so busy. “Information needs to feed into a central repository like the CRM and then automatically generate actions,” he said. “The end result needs to be a ‘to-discuss’ list or a pre-populated email with relevant content embedded within it – this is the kind of intelligent connectivity we’re focusing on as we build our product suite.”

Bringing it all back to the mandate
Intelligent linkage of information seems to be a common theme for the future of client reporting - and perhaps nowhere more so than in how investment performance is explained and contextualised to clients.

According to our experts, delivering truly personalised, meaningful investment commentary should be where wealth managers are setting their sights. Otherwise, they risk being left in the wake of new entrants.

Tim Tate, head of customer experience, Barclays UK, said: “As an industry we could undoubtedly get better at tying together cause and effect, and then personalising that. A few fintechs have been trying to tie up investment narrative with individual portfolios and that will be incredibly powerful when it becomes mainstream.

“I think the industry is a long away from that though. Creating a narrative robust enough that you could stand by it from both a client perspective and a regulatory perspective, is another one of those reporting holy grails.”

While wealth managers will certainly not want to automate away their USP of personal interactions, Tate and other panellists pointed out that putting performance numbers into context eats up a lot of client meeting time that could often be better spent discussing wider needs and concerns. Reports that always robustly link performance back to investment mandate could also be invaluable in increasing client satisfaction and assurance, alongside helping to head off complaints. 

As wealth managers fend off questions of value delivery from both clients and regulators, Davies advocates clarity of messaging, language and visuals. 

He said: “Mandates should be relatively simple, boiling down to ‘here are the risk levels, diversification levels and asset allocation we’ve agreed’. This could lead to a series of performance statements like: ‘Your asset allocation is on track’; ‘Here is where it’s out and this is why our process allows that’; or ‘Here is how we’ve rebalanced. These could even be traffic-lit red, amber and green.

“In essence, you’d have very simple messaging saying ‘Here are the things we agreed to do for you, and we will tick them off one by one, explaining where we haven’t’. As a client, that would give me great comfort that the investment manager understands my mandate and what they’ve agreed to do, and is able to evidence that they doing it.”

This fresh, mandate-driven take on reporting would mark a complete departure from the “wordiness” and bombardment of numbers that can erode client engagement – and serve as a significant differentiator in a world where 40-page tomes are so often the reporting pack norm. 

Importantly, this kind of approach would also enable wealth managers to generate performance narratives they could indeed stand by, via automated means like AI. As ever, maximising the operational efficiency gains available through technological innovations may require re-thinking how things are done at a more fundamental level.

As our experts have made clear, reporting stands poised to develop in many exciting directions, and it is difficult to know exactly how client demand, regulation and competitive pressures will shape what should be the cornerstone of wealth managers’ communications strategies. Agility, therefore, should be their guiding principle.

Brown concluded: “Delivery channels, level of detail, look and feel – they are all up for grabs and more. We foresee a world where wealth managers say to their clients, ‘We’ve got five or six different options, and can cater to all your preferences, so how would you like to receive your reports?’

“Our own corporate strategy has been to bring in - or build - anything our proposition needs as we evolve, and we see wealth managers themselves increasingly taking the same approach. Change is in our DNA and we will help wealth managers get to wherever they want to be with their reporting and communications.”