Is Your Reporting Living Up to Its Potential?

Transcription

1 WHITE PAPER Is Your Reporting Living Up to Its Potential? Three Ways to A Competitive Advantage

2 Investors are demanding increased portfolio transparency. Building trust through accurate and timely reports is more important than ever.

3 Asset managers have a lot to worry about. From winning new business and strengthening current client relationships, to managing portfolios and handling daily trading, to data aggregation and reconciliation, firms have their hands full. With so many vital responsibilities to juggle, some tasks don t always receive the attention they deserve. For example, client reporting typically isn t a firm s top priority, especially when there are so many other high-value factors to manage. But could the right kind of reporting actually be an asset in helping a firm s other high-value core competencies succeed? In light of recent financial turmoil, investors are demanding increased portfolio transparency. Building trust through accurate and timely reports is more important than ever. But strong relationships between asset managers and their clients can be weakened by poor investment reporting. And when remarkable returns are hidden in an unclear report, it s harder for a firm to tell their story. It s a safe bet to assume that no one started an asset management firm because they loved producing reports. Firms want to win business, develop lasting relationships with clients, and generate strong returns. Reporting is a responsibility that managers know is important, but don t often consider a competitive advantage for the firm or high value for clients. But could reports be more than just an afterthought? Could they instead become accessible, customizable, scalable, and streamlined tools that support asset managers and benefit their current clients, as well as attract new ones? Reporting Challenges Already an unpopular task, reporting is sometimes made more cumbersome by the very systems meant to support it. Reporting systems are often built on top of, or integrated within, a portfolio accounting system. Although the portfolio accounting system might do a fine job of tracking portfolio balances and accounting for securities, these systems frequently require manual intervention when processing reports, which can result in inflexible and cumbersome reports. Halyard Asset Management, LLC, a Reporting: A Competitive Advantage 1

4 Managers who see reporting as a distinct strength and opportunity will have the competitive edge not only in serving current clients, but in attracting new ones. 10 Important Reporting Considerations 1. Report Accessibility 2. Custom Report Requests 3. Bad Data Fire Drills Can our clients pull their own reports, or do they have to contact us for ad hoc requests? What if, in order to win a new client, we have to replicate some of their existing reports? Can our system do that? If our reports include data inaccuracies, how can I explain what happened and reassure clients and colleagues that we are addressing any underlying problems? 4. Audit Concerns What if our aggregation, reconciliation, and reporting process gets audited? How solid are the processes and controls? Are we confident or concerned? 5. New Markets What if we want to bring on different investor types, or invest in different asset classes? Can our reporting system support that change? Can we take advantage of opportunities when they arise? 6. Accounting Can we provide book of record accounting and general ledger statements to clients that require it? 7. Transparency Can we demonstrate our performance and exposure value adds using our reporting platform? Does our reporting system tell our story while providing clients the visibility they desire? 8. Internal Communication Can I use our reporting system to build internal reports, run our own analyses, and communicate with colleagues? 9. Scalability Can we grow our assets without having to hire in order to support the reporting process? 10. Software Headaches Do we need IT to support our installed solution? How will we deal with software upgrades? Are custom workarounds required? Is the software being updated as regulatory guidance changes? fixed-income asset management firm created in 2010 that has approximately $400 million in AUM for high net worth and institutional investors, found that a best-in-class reporting tool was essential to gaining a competitive edge, differentiating themselves from competitors, and establishing credibility. As a start-up firm, there are a number of questions that prospective investors will ask you, like How will you account for our assets? What tools do you use to manage the portfolio? How will I know if you are compliant with my investment policy? said Steven Boyd, Principal at Halyard. After Halyard addressed those questions with a best-in-class third-party reporting system, Boyd noted that his firm was... able to focus on more strategic tasks, instead of dedicating the time needed to build reporting and analytics on par with their system. It s completely automated for us and our clients. As Halyard discovered, clients ask a lot from their asset management reports nowadays. To truly be ready for reporting pitfalls, managers must ask themselves if their reporting solution will stand up against any challenge that comes their way. A Different Perspective All asset management firms face varying degrees of reporting challenges. Asset managers who seek out the appropriate solutions to help face and conquer these 2 Reporting: A Competitive Advantage

5 We believe it s better if challenges gain new perspective on what a powerful tool reporting can be. These firms know that strong reporting improves their ability to communicate internally and provides great value to their clients. They recognize that reporting can be a core tool used to compete for new business, strengthen relationships with current clients, and streamline internal processes. 1. Competing for New Business In order to attract new business, asset managers must be ready to address any potential client s needs. Even if your system meets your current clients standards, what if a prospective client asks for complex reporting requirements, beyond those currently in place? A best-in-class system that can easily scale to meet the most intricate client demands could be the deciding factor in attracting new business. Neuberger Berman (NB) is a world-leading independent and employee-controlled investment manager, managing approximately $247 billion in assets for global institutions, advisors, and individual investors. NB had considered accurate portfolio reporting a priority for some time, but were still working with an in-house system that relied on manual entry and aggregation. They found it to be a very time-consuming task, but a necessary one. Given the importance treasurers place on quality reporting, we have to know the information we provide to our clients is correct, said Kristian Lind, Senior Vice President and Portfolio Manager for Global Fixed Income at NB. Even though NB already considered client reporting an important part of their service offering, they soon realized that their corporate treasury clients had very specific and separate reporting requirements, which weren t being met by the cumbersome manual system. Looking at the process of aggregation, reconciliation, and verification in totality outsourcing to a solution provider dedicated to ensuring quality data became far more attractive than developing, building and maintaining the the reporting comes from a third party rather than from the entity making the investments. That way, we re looking at the same data as our investors and that s the way we believe it should be. Adam Dean Senior VP and Managing Director Square 1 Asset Management infrastructure necessary to do this internally, said Lind. As NB discovered, many clients have specific reporting requirements. For example, some investors not only need performance figures, but also to understand how returns were calculated and achieved, how returns in excess of benchmarks were achieved, and what risks were taken to generate returns. Is your reporting system prepared to support these complexities? If a prospective client sends a packet of reports your way and asked if you could reproduce them, would you feel confident that your reporting system could handle the challenge? 2. Strengthening Relationships Asset management is about client relationships as much as it is about client assets. Strong relationships depend on strong communication, and transparent Reporting: A Competitive Advantage 3

6 reporting is one of an asset manager s most important communication tools. Adam Dean, an asset management executive with experience at both multibillion dollar asset management firms and smaller niche firms, recognizes the value of client relationships and higher levels of transparency. Rather than develop a system internally at both great expense and a significant time investment, Dean believes in deploying a specialized third-party entity to produce actionable portfolio reporting. We believe it s better if the reporting comes from a third party rather than from the entity making the investments. That way, we re looking at the same data as our investors and that s the way we believe it should be, said Dean. We feel that anything less amounts to having the fox guarding the henhouse. When Dean s firms committed to this total portfolio transparency, they not only reinforced the integrity of their advisory services, but produced high-quality reports that gave them a competitive edge in the marketplace. And by using a thirdparty entity who specializes in reporting, they did it all without adding to their workload. While we were very good at reporting, we wanted to stay focused on our core strengths, while also dedicating time to attracting new client assets. Adding to that, there was the inescapable concern of providing reporting without the perception of bias... said Dean. Best-in-Class Reporting Means... My clients can easily access their reports. I can customize my clients reports. My data can be trusted. I can easily and quickly address any audit concerns. My reports can meet the needs of any new clients. I can provide clear accounting records. My reports are transparent and easy to read. I can effectively use my reports as communication tools. My reporting system can grow with me. I don t need a whole IT department just to upgrade my reporting service. My clients have access to reporting at any time, and all necessary personnel within my firm has access to the same reports and underlying data. My reporting system has the flexibility needed to customize reports for individual clients. My reporting system has a foundation of data that I can trust, and if problems do occur, it is easy to find out what happened, why, and how we can prevent it from occurring again. If I get audited, I know that I can easily provide necessary information and be confident of the outcome. As opportunities to invest in new asset classes, new markets, and with new client types arise, I know I have a reporting system that can provide the necessary regulatory reporting and flexibility to meet different reporting needs. I can provide necessary book of record accounting and general ledger statements to clients that require it. I can easily build views and reports that tell my story and help guide my discussions with my clients. We use the same reporting system as our clients to accomplish day-to-day tasks and communicate internally. I can add AUM and new lines of business without having to continually hire to support the reporting process. My reporting provider continuously enhances the offering, and new enhancements are seamlessly integrated into the existing product. Our solution does not require IT resources, and periodic software upgrades are not required. 4 Reporting: A Competitive Advantage

7 Asset managers who seek out the appropriate solutions to help face and conquer these challenges gain new perspective on what a powerful tool reporting can be. 3. Streamlining Internal Processes Controlling costs is a top concern for any business, and asset management firms are no exception. When firms are first getting started, and have only a handful of clients, it s not surprising that they d use manual workarounds for reporting, depending on the needs of each individual client. And as the book of business grows, it might seem easiest to just add more human resources or try to use outdated systems. But as clients start to outpace the system, asset managers find themselves hiring more people to address reporting challenges, and holding together fragmented reporting processes with offline spreadsheets and manual workarounds. The internal reporting process can also suffer. Portfolio managers, for example, likely have different reporting requests compared to their clients. However, there is tremendous value in a single reporting system that can be used across the firm, from portfolio managers to relationship managers to compliance and operations to the end client. Halyard Asset Management, who brought on their third-party reporting system right from the start in 2010, have considered it... integral to our client offering ever since, said Boyd. A bestin-class reporting tool streamlines the process from start to finish, grows along with the client s needs, and supports the firm so they can focus on managing money and building relationships. How to Ensure Your Firm has Best-in-Class Investment Reporting What if you were able to focus on your core business of managing portfolios, winning new business, and strengthening your client relationships, while partnering with a firm whose core business is providing your firm with best-in-class investment reporting? What if instead of purchasing ad hoc tools to try to take care of each client s reporting needs, you had a partner who truly served as an extension of your team to take on these responsibilities for you? If reports have always been important to your firm, or if you ve never thought about reports as a competitive advantage; if you re a small firm just starting to refine your best processes, or a multi-billion dollar firm realizing that you need a new approach, there are tools that will make the process more flexible, streamlined, and strategic than you ever expected. You might never have thought of reporting as a powerful tool before, but exploring the ways that reporting can enhance your business will help save time and money for your firm, as well as your clients. Managers who see reporting as a distinct strength and opportunity will have the competitive edge not only in serving current clients, but in attracting new ones. References: Boyd, Steven. Telephone interview. 11 October Dean, Adam. Telephone interview. 2 February Lind, Kristian. Telephone interview. 26 October Reporting: A Competitive Advantage 5

8 About Clearwater Analytics Clearwater Analytics is the leading provider of web-based investment portfolio accounting, reporting, and reconciliation services for corporate treasuries, insurance companies, and investment managers. Clearwater aggregates, reconciles, and reports on over $1 trillion in assets across 25,000+ accounts daily. For over a decade Clearwater has partnered with investment managers of all sizes, allowing them to focus on their core business and grow their firms. Clearwater technology and service allows our partner firms to capitalize on new opportunities, strengthen their existing client relationships, and streamline their internal processes. Clearwater remains committed to continuous improvement of the solutions we are providing to current clients, while encouraging prospective firms to rethink how they approach their operational challenges. INQUIRIES sales@clearwateranalytics.com info@clearwateranalytics.com WORLDWIDE OFFICES Boise, Idaho New York, New York Edinburgh, U.K Clearwater Analytics All rights reserved. This material is for informational purposes only. Clearwater makes no warranties, express or implied, in this summary. All technologies described herein are either registered trademarks or trademarks of their respective owners in the United States and/or other countries