Financial Advisor Marketing & Technology

Marketing & Technology For Independent Financial Advisors

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Reporting Performance Daily

An article in today's issue of Investment News, entitled "Performance Reporting Isn't Cutting It For Clients," contains some good points but also contains some confusing information.

The story is about how important it’s been for advisors to be able to post performance reports online daily. Since the market crisis erupted in early October, the need has become acute.

That makes sense. A small portion of clients are probably looking for daily updates. But the story quotes Celent Communications LLC analyst Robert Ellis saying, "Reporting is the biggest reason for wealth management client attrition." That's ridiculous.

Most advisor relationships fall apart because of a lack of communication. I've never heard of an advisor getting fired because his performance reports were issued too infrequently–never mind because the reports were formatted poorly, difficult to understand, or not available online.

I have no quarrel with the basic premise of the story. More clients want to view performance reports online than a year ago. But only a fraction of clients will check them daily, even in turbulent times.

The story also rightly says that web-based systems make it easier for advisors to provide online reports. But what’s missing from the article is any mention of the fact that the desktop applications are accommodating advisors who want to post reports daily. Which brings me to my next point.

Contrary to the thrust of the article, just because an advisory firm is using a desktop application does not mean it cannot provide online reporting daily. For instance, Advisor Products has developed an interface for uploading PortfolioCenter reports that allows advisors to batch upload client reports. An advisory firm can create an XML extract of its client reports in PortfolioCenter every morning and upload it to our AdvisorVault 2.0 in minutes. The reports are parsed by an application that runs on our server and they are automatically dropped into each client's secure, encrypted vault folder. While the manual upload process surely is an extra step that is avoided if your firm uses an online portfolio reporting system, it is—contrary to the impression you'd get from the article—very doable daily.

Another place where the story goes wrong is in confusing the information contained in the reports with the ability to post reports online daily. Specifically, the story quotes Celent analyst Ellis saying that wealthy clients might get "subpar" performance reports "because their portfolios tend to contain esoteric asset classes and sophisticated securities. In addition, their portfolios are held with several custodians, and assets are denominated in many currencies, a situation that creates a huge reconciliation and reporting nightmare."

The ability to handle multi-currency reporting and arcane securities, however, has nothing at all to do with the reporting application's ability to get reports online daily. Moreover, the weakness of the desktop PMS applications is not in their inability to handle multi-currency portfolios and exotic securities. Few advisors need multi-currency reporting. Even the most sophisticated advisors I know aren't running non-dollar denominated accounts. Plus, many exotic investments are not even priced daily–like oil partnerships and real estate deals. And to the extent an advisor is using an esoteric security, the desktop apps are probably more likely than web based applications to be able to account for them simply because they have had so much more experience with handling Original Issue Discount bonds, Zeroes, and other offbeat securities.

The story confuses the information in performance reports with the ability to post reports online. If the data in the reports are not giving clients what they need, however, the advisor needs to simply change the reports. That's a separate issue from whether it is possible to get the reports online.

To be sure, portfolio reporting is headed to the web. Advisory firms using desktop reporting applications will be in the minority in five years. But advisory firms have not been ready for online PMS applications and only recently started to warm to them.

Incidentally, I don't like taking a cheap shot at another advisor-technology writer. The author of the article in question is a careful reporter and has been doing a great job. I've read his articles for months and have enjoyed his work. This just wasn't his best story.

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