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Wealth Managers Must Raise Client Reporting Game

Tom Burroughes and Jackie Bennion, 25 February 2019


In this feature, the editorial team talk to firms in a number of countries about what's happening with client reporting, and where it must improve, and what are the benefits and limits of technology.

(Updates with new material.)

Wealth management firms are not always easy to tell apart and with back- and middle-office functions outsourced and commoditised, a happy client experience is crucial in winning new custom and retaining it. That’s why client reporting counts for so much.

A recent research report conducted by this publication asked readers, in August last year, the question “Do you see enhanced reporting capabilities as a key way for wealth managers to attract and retain clients?” Of those who clicked on the poll, 72 per cent said yes; 14 per cent said clients “are likely to demand better capabilities going forward” and 14 per cent answered “no”, and agreed with the statement that “the industry is already meeting client demand well.” 

Client reporting may be a big differentiator but there’s dissatisfaction about how well wealth managers shape up. James Day, managing director of Peritus Investment Consultancy, quoted in that report, said: “The quality of client reporting is generally mediocre, with only a few stars in the field. Of the hundreds of institutions that we work with, I can only think of ten who have invested capably in their reporting and communication process.” 

With markets becoming more volatile and some of the easy equity gains of past years more elusive, clients need quick and simple information. New technological channels and desire for 24/7 on-the-go access also mean that clients aren’t impressed by infrequent emails or chunky PDF files stocked with regulatory health warnings, eye-straining charts and jargon. 

“Ask yourself how many people are looking forward to their reports and sit down and think that it is fun to read,” Nicholas Hochstadter, chief executive of Performance Watcher by IBO, a business based in Morges, near Geneva, told this publication. 

“If you look at a lot of private bank reports, they aren’t often very simple….but reports should get direct to the point. The report should show why what you’re doing is relevant to clients,” Hochstadter, who has an extensive banking background, said. 

Hochstadter’s business is built around the idea of building an objective, un-conflicted database of evidence showing trustees, wealth managers and others how well portfolios perform. (This publication interviewed him back in February 2016.)

Urs Bolt, a former senior Credit Suisse wealth manager and now running his own firm, bolt.now, is enthused about what technology can bring to the client reporting party. (Bolt is also a judge for the WealthBriefing Swiss Awards programme.)

“I agree that any client-facing process can make the difference in a competitive and transparent market. In wealth management, client reporting is certainly one of the most important areas. A clear and easy to understand reporting of performance and risk figures is how the client can gain further confidence,” Bolt, who is based in Switzerland, said. 

A headache for firms is that some of the material they issue to clients is mandated by regulators, and that is not always the same as what customers might want, and might also eat up budgetary resources.

“The regulation tsunami in the last decade since the financial crisis, such as MiFID II, increased AML/KYC and other documentation requirements, led to a massive increase of compliance staff. Unfortunately it didn’t increase client satisfaction and many client processes including portfolio reports became thicker instead of thinner. Also, the disclaimers and other mandatory information rather decreased the usability. This has to change and technology is one of the areas helping out here,” Bolt said.

A common misconception among wealth managers is that their clients are slow to embrace technology. “Even among the more traditional wealth management demographic, real-time access to client portfolio analysis and information is becoming the expectation rather than the exception,” Andrew Watson, Head of Regulatory Change at JHC, a technology firm, said. 

The banks

Given the importance of this topic, this publication contacted a raft of banks and wealth management houses about the issue. With a few exceptions, none were willing to comment on the issue. 

One senior private banker who did comment was Etienne D’Arenberg, the head of the UK market and a limited partner at Mirabaud, the Swiss private banking group marking its 200th birthday this year. He is also a member of this news service’s editorial advisory board.

“Every manager must present [clients] with a statement and these are fairly simple and always done to present information quickly,” he told this publication from the Mirabaud Europe Ltd branch offices in the Victoria area of central London. 

“The key is simplicity and transparency,” D’Arenberg said. 

“We are very happy to publish the total expense ratio,” he said, talking about how Mirabaud sets out the total cost of running portfolios for clients.

“Normally account statements are photographs of a given moment but such regular reports need to show how money in a portfolio has been managed, in a specific way and if fiscal or other restrictions have been followed,” he said. 

Many clients are also happy to take a longer-term view on how their money is being managed, even if they get a snapshot of their accounts and its performance. “You can quickly see if it worth using an active manager,” he said, adding: “Reporting allows you to show that there’s a process involved.”

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