Slick, digitally-delivered consolidated reporting is rising higher on the agenda of wealthy clients – regardless of the age-based segment they may fall into. Here, we discuss the biggest challenges when it comes to providing these increasingly in-demand capabilities, and more importantly, how these can be overcome.

For clients, consolidated reporting offers the chance for them to monitor the performance of all their investments conveniently, freeing them from the necessity of manipulating a plethora of data via personal Excel spreadsheets, or seeking this (expensive) oversight from an external provider. While maximising client satisfaction is the top priority for wealth managers, delegates at a recent WealthBriefing Breakfast Briefing heard how consolidated reporting can be a doubled-edged sword, as MyPrivateBanking’s Steffen Binder explained. This is the second part of a feature around these topics; see here for the first part.

Establishing dominance

“Many clients, when they see a consolidated report for the first time, detect some overlap in their assets,” he said. “That should give some thought to banks as well: clients want to compare performance."

He added: “When you do consolidated reporting for the clients, you might be on the weaker side potentially and that could be dangerous.”

However, Binder stressed that across the breadth of his firm’s research, confidentiality, privacy and security are consistently the top-three concerns for clients in the digital space, and as such trust in who they are handing this information over to is paramount.

Furthermore, Citisoft’s managing partner, Steve Young, added that client loyalty is at stake if wealth managers do not keep up with the market in terms of providing consolidated reporting alongside other sought-after offerings. “Today about 10 per cent of clients in Europe are ready to switch providers if they don’t get the kind of digital service they’re expecting,” he said.

“Consolidated reporting is also about the value-added services that you offer," UBP's managing director of discretionary portfolio management, Jason Ulrich, said. "The report is the basis of steps to follow on later,” he observed.

Keeping it simple

Young added, though, that wealth mangers should not lose focus on their raison d’etre – to provide a highly bespoke service.

“Sometimes people are too obsessed with the technology and lose focus on the service end,” he said. To combat this potential risk of offering a convoluted digital interface for the sake of doing so, Young said that “the smart firms are making their reports simpler”.

Arguably, the true value in consolidated reporting that banks must show is in the extra qualitative “colour” and goals-based meaning that may be elicited from the data. As Young said, “if you give people too much information, they’ll jump to their own conclusions.”

Establishing ROI

When looking to invest in consolidated reporting, especially at a time of squeezed margins, justifying the investment is an essential precursor to deciding to make enhancements, it was said.

For SS&C Advent's Paul Bebber, the potential return on investment can most easily be pinpointed in man-hours saved by firms avoiding the manual entry of data. “As an FTE [full-time employee] cost, you can definitely attribute what you’re doing to the cost of somebody,” he said.

Although any discussion of personnel being replaced by technology may be a thorny subject for wealth managers, Bebber said they should focus on the “value-add” elements of reporting enhancements to secure staff buy-in as well as management approval for the investment.

“Your value-add is not re-entering data. There are so many things you can do to service clients better,” he pointed out, highlighting the slew of new regulations continuing to bombard the financial services industry. “The business case is simple – there are FTEs you can free up to do other things and you will start to struggle to grow if you can’t dislocate manual entry.”

Arguably, those institutions that do not adopt stronger reporting capabilities risk getting left behind as new players – perhaps from outside traditional financial services - enter the market in the coming years.

“Suppliers are going to change dramatically in the next decade, and I think greenfield suppliers will come in as technology’s going to be a huge differentiator,” Young said, pointing to possible ambitions in the sector from players like Google and the Chinese messaging platform WeChat.

The pain of legacy systems

The biggest challenge wealth managers face when looking to add consolidated reporting to their toolkit is grafting this onto legacy systems - the technology battle fought time and again by wealth managers looking to innovate.

Having good technology in place is essential groundwork, without which consolidated reporting cannot work, Young argued. “If you don’t have smart technology, you can’t have a smart offering and smart operations,” he said.

“I think a lot of firms are deluding themselves that their back-office accounting system is a legacy system and it’s not a problem,” he added, explaining that these cause problems with the data collected and produced, and that these weaknesses are inevitably exposed during the consolidated reporting process.

“Client reporting is the end of the process, but it [the system] can only report on what it can report,” he said.

Consolidated reporting for a consolidating industry

Hugh Macquarrie, the leader of Deloitte's banking transformation practice, noted here that the rising rate of mergers and acquisitions amongst wealth managers can cause further operational issues.

“You have challenges around the acquisition and consolidation of new businesses onto the existing platform. This creates a controls and governance challenge around the accurate and timely reporting of a consolidated report,” he said.

Good governance must be in place around change processes and data management at every level, Macquarrie urged, to ensure the success of consolidated reporting initiatives.

He described how low failure rates come from “having an understanding on how the data is coming in across all asset classes, within the bank and also from third parties,” he said.

Moving away from manual

Manual workarounds and inputting of data to enable consolidated reporting is not a sustainable model, Young said, in terms of cleansing and checking a report before it goes out. He explained how this “archaic” model cannot produce reports in real-time (or as close as possible), as many clients demand in today’s mobile age. Good client reporting systems should be workflow enabled, and data should be changed at source rather than via end-user computing from relationship managers, he said.

Bebber agreed: “Automated aggregation of client reporting data is essential, and what we see all the time is Excel spreadsheets.”

The manual model will be sustainable, however, as long as a fee can be demanded from clients for this, in the view of Deloitte’s Macquarrie. Yet, as properly automated consolidated reporting becomes increasingly the norm, the case for continuing with labour-intensive workarounds is sure to lose its force. As the experts concluded, this way of working is barely tenable even at the very upper echelons of the wealth scale - and certainly not for institutions working with higher client volumes.