For most asset managers, regulator-mandated investor-facing reports such as quarterly or annual financial statements or prospectuses have become more than just reports to meet disclosure requirements—they are also a way to showcase their brand to investors. 

Some fund reports are graphics-heavy, using custom fonts, unique spacing and other tricks to set their brand apart. These visual standards typically stem from the Marketing Department, where they work hard to develop brands that are easily identified in the marketplace. I’m picking a bit on Marketing here, because while I understand standards are necessary, the rigidity with which they are applied often causes a trade-off down the line that the fund shareholders pay for in the end. And more often than not, they are like the Wizard behind the curtain that no one dares to challenge.

In my experience, most back-office administrators are adamant about recognizing an operational return on investment (ROI) for every dollar invested into their operations, especially for software purchases. The price of the software is balanced against ‘saves’, whether it’s an efficiency gain or an FTE reduction, to justify the cost of the software solution.

Over the years, I’ve had clients whose ROI has degraded because there is an unwillingness to change the appearance of reports that, otherwise, meet all the regulatory requirements. For example, in most financial reporting applications, custom formatting that requires manual workarounds drives up support costs. These custom settings could be column header formats, line spacing, unique fonts, etc. I’ve seen custom sorting of footnotes that were so complicated, that a manual workaround appeared less costly upfront. The workaround, though, had to be done in the back office manually for each report, for each cycle. This effort required hundreds of hours of manual intervention that could have been avoided by using the system as designed. In this case, Marketing was not willing to modify their style and insisted it was adhered to, which resulted in higher ongoing costs to achieve the desired output.

From a back-office perspective, it is a good idea to document these types of challenges with managing client deliverables, and to have a solid understanding of all unusual workarounds that take a significant amount of resources to fulfill. This will enable better communications with Marketing that are backed up with hard facts about cost overruns.

The following questions should be considered while exploring the operational workarounds related to stylization and output in the back office:

1. What is unique about the requirement that is causing the manual workaround or additional costs to automate?
2. How much flexibility has been designed into the overall requirements to allow for cost-related decisions to be made in the back office?
3. Without the workaround, how is the system designed to work?
4. How much time/manual effort can be reduced by changing the requirement?
5. How does the proposed process impact the overall cost to complete the report?

Once you can answer these questions, build a business case to explore with Marketing (i.e. with this change we can save 80 hours per cycle x rate x # cycles). The numbers add up rather quickly.

With the reduction of paper filings and with easily-accessible PDFs available for clients on your website, my hunch is that your clients would prefer a lower expense ratio than a custom-sorted footnote.