Welcome to the Brave New World of Client Reporting

This is the third in a series of blog posts looking at the need for step change innovation in the technology used for all forms of client and market communications with all types of investors.

In this post we will explain what is wrong with the traditional client reporting model and why its limitations will become increasingly exposed over the next few years.

The challenge of client reporting

Client reports (such as quarterly investment reviews, valuation reports, personalised investment summaries, and factsheets) have always played a key role in managing the relationships between asset management organisations and investors.

This is why asset management organisations expend substantial amounts of effort producing reports every month/quarter and overcoming significant operational challenges.

The main challenge associated with producing reports for institutional investors and for high net worth individuals is customisation. Many of these investors want reports to be customised to meet their specific requirements, but many managers struggle to incorporate a high degree of customisation into their reporting processes in a cost-effective way.

The challenges associated with report production for retail clients and for investors in unitised investment vehicles/commingled funds are different. These reports are produced at a fund level rather than a client level and so customisation is not a major issue. The main challenges here are scale of production because reports have to be sent to all investors in the funds, and regulation because funds operate within regulatory constraints and the reports have to comply with the relevant regulations.

Why customisation is such a challenge

Some managers refuse to customise client reports. It is harder to maintain this stance than in the past but it is still possible to do so, if investment performance is strong enough. At the other extreme, there are managers who customise every client report.

Wherever you stand along this spectrum, you will almost certainly view customisation as a challenge, as something that complicates the production process. You may have a client reporting system that can support customisation, but you probably still have issues keeping everything in step with every client’s requirements as they change from one reporting period to the next.

And that’s because the root cause of the customisation issue is the asset management reporting model itself, the fundamentals of which have not changed in 20+ years.

The traditional client reporting model is based on a one-size-fits-all principle. It assumes that it is possible to rationalise the reporting requirements of different clients into a common set that can be adapted to meet individual needs.

A template is designed for a ‘standard’ report that will meet the generic needs of all investors in a particular type of investment product. To support customisation, the template is modified according to the needs of individual clients. So the traditional client reporting model supports customisation by relying on the existence of generic template.

But we are now at the point where investors want a bespoke reporting service rather than a customised one. Some investors want a comprehensive report delivered quarterly; others want a less detailed report delivered monthly; and some would be happy with a high-level overview delivered twice a year. Some investors require reports to be printed and posted; others want PDF reports that can be downloaded to their tablet. And even an individual institutional client is not a homogeneous entity; it is multi-faceted, with different people wanting different information at different times, delivered in different ways.

In other words, the generic requirement is now for any information to be provided at any time, in any format and via any type of delivery channel. Therefore, the one-size-fits-all principle underpinning the traditional client reporting model is no longer valid.

And why it’s going to get worse

This is not to say that the asset management industry is on the brink of some kind of client reporting meltdown. But the challenge organisations now face is with the customisation of the client reporting process, not with the customisation of reports. And the limitations inherent within the traditional client reporting model will become increasingly exposed over the next few years as the requirements of clients, and their service-level expectations, diverge further.

But perhaps the biggest issue with the traditional client reporting model is that it cannot be adapted to support the distribution of information via digital channels. As we explained in the previous post, two characteristics of digital distribution channels set them apart from traditional channels: 1) information can be customised at the point of engagement with individual consumers and 2) consumers access information via a dynamic, rather than a static, interface.

The traditional client reporting model is designed to support the customisation of reports, not the customisation of the reporting process. If asset management organisations only distributed information via paper and PDF, then they could probably continue with the traditional reporting model, albeit via an increasingly cost-inefficient production process.

But the digital transformation of asset management is underway, and organisations now have to support digital distribution. This requires information to be distributed at a component level rather than at a report level. Some organisations are doing it today but few are doing it on a large scale and cost-effectively.

In fact, asset management organisations are caught in a cleft stick. The traditional client reporting model cannot be adapted to support digital distribution. But the technology that is used to support digital distribution is not backwardly compatible with the traditional client reporting model. This will exacerbate the data management issues that organisations are facing, further increasing operating costs at a time when they need to be moving in the opposite direction.

It’s time for a change of direction

What is required is a new way of thinking about client reporting, a new operating model in which we no longer think only in terms of generic templates that can be customised to create a ‘family’ of reports. We need to think in terms of bespoke reporting in which discrete components of information are combined and aggregated to produce individual reports.

That sounds a lot more appealing than putting more and more effort into trying to make the traditional reporting model work in a world where it is no longer fit for purpose.

Integrated Publishing Solution's iPlus solution is the cornerstone for organisations serious about building a digital strategy that will work today, tomorrow and long into the future. Read this success story to learn how a global asset manager enhanced sales productivity, transitioned distribution to digital channels and reduced operating costs.

We bring you a series of blog posts and case studies by our team:

Graham Duncan, CEO and Founder of Integrated Publishing Solutions, has significant practical experience in providing successful integrated digital solutions to the Asset Management industry, from the world's first online portfolio valuation portal for Killik & Co, in the 1990's, through to the current global deployments of iPlus 3.

Dr Peter Ellis brings a deep understanding of the Asset Management industry. Managing Director at Deutsche Asset Management and, subsequently, Investit. Chief Operating Officer and Strategic Advisor to BISAM. Peter brings a remarkable depth of knowledge to the Integrated Publishing Solutions team.

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