Much of client reporting has not changed in the last 30 years. Yes, if asset managers looked at their reports then and their reports now they should be seeing a difference in presentation style, their systems should be better, data should be properly managed and there should be workflow to make production and distribution more efficient. Why, therefore, should the service model be changing now? Here are five good reasons.
1. Regulation
The sheer volume of regulatory changes that are currently being written, reviewed and implemented is staggering. Some of this is directly impacting the information we need to deliver to our clients and some are reporting to central authorities, but they all require significant volumes of position and / or transaction data on the portfolios we manage. I know that the range of data attributes involved in Solvency II is vexing many asset managers and some are feeling that clients are asking for what they have been told to ask for, regardless of relevance or use.
To meet these regulations we need good data management, a central repository of re-usable data, flexible report / data output and workflow management. In other words, all the ingredients of client reporting.
What is also interesting is that many asset managers are establishing new departments with responsibility for regulatory reporting
2. Distribution Models
Asset managers are generally increasing their international footprint and offering retail funds and institutional services to clients in multiple countries. If we look at Europe, this means not just the ability to report in multiple languages, but also follows on from the previous point as each country will have its own regulatory requirements and need different disclaimers, etc.
One recent survey found over 30,000 retail fund asset classes available in the European retail market. That equates to a frighteningly large number of factsheets and KIIDs being produced on a regular basis – and a major headache in keeping up with the different regulatory regimes in each country.
Another concern is online sales of retail funds. This is where external organisations are selling retail funds and the asset manager has little or no control over how their funds are marketed on those websites, how up to date their information is, and so on. Online sales will only increase requirements for more frequent publication of data.
3. Multi Asset
Recent surveys have indicated the rapid growth in interest in this type of mandate and this is certainly borne out at a number of our clients. This is quite a different way of managing money and requires a different style, not just in portfolio construction but also in how it is reported to clients. When asset managers launch a new product, they should also decide how it should be reported and then determine how to do that rather than just applying existing standard reports.
These portfolios are managed by putting together a number of investment strategies, where each strategy is a combination of securities to give a very specific exposure based on the asset manager’s views. It is not therefore fitting to report at the security level, but rather at the bundle level. Conventional reporting is just not appropriate.
4. Client Demands
Clients are increasingly demanding more sophisticated reporting and analytics – and some of them even understand what they are asking for and what it actually means.
Again this ties in with the point on regulatory changes as more reporting and data is demanded of us. Asset managers are told that they need to be transparent, but at the same time, they are also hearing that ‘less is more’ and that they are providing too much information.
5. Technology
Paper is still here, and will remain for a while yet, but the convention today is to email a PDF to clients. There is still much attention to detail on colours, typeface, and so on, but now the printing is done by the recipient on a small desktop printer, often in black and white. This, of course, renders all the colour in the report into grey.
