Wealth reporting is coming out of the dark ages and into the digital era. Long gone are the days when wealth management reports were simply statements of a client’s transactions during the previous quarter. Over the past decade, a growing number of wealth management firms have embraced reporting as a strategic advantage, leveraging the opportunity to provide clients with more, and more detailed, information.

For firms to remain competitive, the challenge then is to find ways to provide more robust client reports. Small- to mid-sized firms may struggle more with doing this, as client data may be dispersed across different platforms and applications.

The evolution of wealth reporting

The information reported on wealth management reports was historically not much more robust than the information contained in custodians’ quarterly statements. Custom reports offered advisers the opportunity to add marketing statements,

firm-specific information and disclosures, however in terms of the actual information provided to clients, many firms’ reports were far from robust.

The trend toward providing more detailed client-specific reports really gained traction after the market correction in 2008 and the subsequent erosion of trust that occurred in the industry in its aftermath. While some firms had already begun customizing client data, these events created an opportunity for firms to be more transparent in their reporting.

In recent years, more and more wealth managers have recognized that quarterly reports are a fantastic opportunity to provide a depth of information that can help showcase the advisor’s knowledge and expertise, reinforcing to the firm’s clients why they’re working with the firm in the first place.

Information firms are now routinely adding to client reports includes:

Personal rate of return.

Rather than simply showing returns for individual portfolio holdings, client reports now routinely include a rate of return calculated for each client. The personal rate of return is based on the client’s specific allocations to various holdings, factoring in additions and redemptions during the reporting period. This provides a much more meaningful number for clients when evaluating their portfolio’s performance.

Portfolio analytics.

Instead of simply reporting on holdings and balances, reports now routinely include graphs and charts showing information such as the client’s asset allocation compared to their target allocation.

It is also common now for reports to include an analysis of portfolio holdings within each asset class and sub-asset class as compared to their benchmarks.

Firms catering primarily or exclusively to high-net worth clients are also including additional analytics such as alpha, beta, attribution and more.

Firms that cannot, or choose not to provide clients with these types of in-depth analytics risk giving clients the perception that their services are less than those provided by other wealth managers.

The case for consolidated reporting

While clients have heard time and time again that they should not put all their financial eggs into one basket, they nevertheless want a seamless experience when it comes to reviewing how their investments performed. Financial assets are often dispersed among several firms, either by design or by necessity (i.e. 401(k) assets in employer’s plan).

This can be great for diversifying holdings, however it can be tough for clients and their wealth managers to make sense of their overall financial picture if they have to review multiple reports and statements, each displaying information a little bit differently.

Better client service

For advisors, consolidated reporting makes it easier to provide actionable advice. Take, for example, a fee-based wealth advisor who crafts an Investment Policy Statement (IPS) and determines a target asset allocation to help clients meet their investment goals. With respect to any assets under management with that advisor, the firm can manage to the IPS targets, and can report on those assets, providing clients with a quarterly picture of whether or not they are on track.

However, if that same client also has an investment account with the broker down the street, a 401(k) plan through their employer, and CDs through their local bank, the effectiveness of that advisor’s IPS and reports becomes diluted. If the intention of the IPS targets was to provide truly holistic advice and manage the client’s investments to meet overall goals, the advisor will need to find a way to factor in those outside assets when making portfolio rebalancing decisions and providing advice and recommendations. Because most clients have assets with more than one financial institution, such a scenario is the norm rather than the exception.

Furthermore, clients are seeking advisors who can provide enhanced quality of advice across the entire investment portfolio. A CapGemini study found that 79.5% of investors stated that their advisors’ ability to provide such broad advice was important, or the most important factor in deciding where to allocate their wealth. (Source: CapGemini.)

Advisors without some capability of providing consolidated performance reporting on a client’s overall portfolio will only be able to offer either limited, or extremely inefficient, service to their clients.

Challenges for firms

For wealth managers, the challenge becomes how to select and implement a solution that will meet all the organization’s needs while providing clients with the depth of information they want and need about their portfolios.

There are plenty of providers in the industry offering to aggregate feeds from clients’ investment and other financial accounts, for purposes of providing consolidated reporting. And, those same providers typically offer firms the ability to fully customize wealth reports for clients to include as much, or as little, information as they want.

Organizations looking to select a firm to help them need to consider a number of factors, including:

• Depth of reporting. Does the provider allow the advisory firm to customize reports, selecting fields to display and key metrics to include, based on what advisory clients want to see? Some providers offer higher levels of customization than others.
• The provider’s IT and information security infrastructure. How will they keep clients’ information secure? With the very real threat of cyber crime growing every day, this question has never been more important.
• The provider’s reach. From which companies is the service provider able to obtain feeds of client account activity?
• Information reconciliation. How often are feeds received, how is information reconciled with the custodian’s information, and what happens if a feed “breaks”?
• Client access. Does the provider offer, or can their product coordinate with, a client portal? More and more clients want to access their financial information online or through mobile apps. A wealth manager who can provide clients with a reporting tool that not only offers static quarterly reports but also the ability to log on and view their financial picture any time will likely be perceived as having a stronger value proposition than a provider who simply provides monthly custodial statements.

Aggregation and reporting tools do not need to include every possible bell or whistle to be effective; wealth managers and their firms should select a solution based on what makes the most sense for their advisory practice and their clients.

Conclusion

In order to remain competitive, firms must continue to find ways to offer innovative services for clients and advisory personnel alike. Clients want to feel their advisor is competent, transparent and trustworthy – wealth reporting is an easy way for firms to showcase their strengths.

By providing clients with robust reports that include analytics and comparative data specific to the client’s relationship, and by offering an aggregated reporting solution, advisors will be both meeting client needs and requests, and in a better position to provide tailored advice and service for the client’s entire portfolio.

Firms would do well to evaluate their current reporting capabilities to determine whether there are opportunities to provide a better deliverable for their clients.

What is your firm doing with regards to wealth reporting?