One of the most important trends that has affected the asset management sphere in recent years is the shift of market power toward the High Net Worth Individuals (HNWIs) and institutional investment clients.
According to a report published by Roland Berger AM a few years ago, “the balance of market power is gradually shifting toward the retail and institutional investment clients (…). [These clients] are now becoming better-informed, more professional, more focused on outcome-driven investing – and more willing to pull the plug when they are dissatisfied. Asset managers must pay much more than lip service to client-centricity – a capability that is as rare as it is valuable (…)”
Over time and after many regulatory changes, institutional clients have become more demanding when it comes to their investment portfolio reporting. The volume of required data has substantially increased as we have moved from monthly to daily calculations. Clients are no longer willing to receive lengthy monthly reports that are difficult to digest. Rather, they are asking for easily accessible and detailed daily reports that feature more relevant and timely calculations in relation to their specific portfolio and risk approach.
They also want the capability to customize their reports beyond basic asset classification and regional segmentation, as well as better visualizations so that they can consult those reports anytime – anywhere – on any device.
Similarly, as asset owners (pension funds, insurers, banks, sovereign wealth funds, foundations, endowments, family offices and wealthy individuals) start outsourcing a greater portion of their investments, asset managers must be able to deliver reporting that fits a wider range of investment processes.
All of these trends have pushed asset managers to increase their level of transparency and granularity in the data they report in order to deliver the right information to the right people. This means their systems now need to be able to store industry standard and proprietary classifications, performance and risk analytics, and compliance rules. Relevant reporting needs to be delivered on a daily basis, via email or web portal, and be available online when needed.
But achieving the level of sophistication that a client-centric information model requires is only possible with the help of innovative software solutions that can handle large volumes of data. These solutions must also be able to deliver reports through different channels, and in accordance with each client’s investment processes, regulations, and compliance rules.
And that, for most asset managers, is a real challenge. Current analytics and reporting systems don’t allow for such depth and most asset managers will have to adapt, and when needed, replace their legacy systems with next generation tools.
Beyond the transparency, accountability and auditability needed for improvement, a high level of flexibility and scalability is also required to cater for all the different investment processes asset managers are using to add value to their portfolios; now and in the future.
Asset managers need to adopt systems that will deliver clean and accurate data at an acceptable cost. They should also allow clients to set up their own workflow, controls and sign-off processes.
Understanding the risk profile of each client, how active returns will be achieved, and what key performance and risk indicators are used to monitor the investments is of paramount importance, since it will dictate which analytics and attribution methodologies should be included in the reporting.
Client reporting services are an important part of the asset manager’s value chain so in order to retain and gain new business, it is imperative that the asset managers listen to their clients and offer services that meet their individual terms.
As the before mentioned report says, it is time for asset managers to pay much more than lip service to this valuable capability that is client-centricity.