Nov 15, 2021

Reducing the number of custom reports produced by a firm is a gift that keeps on giving ─ and it achieves the following:

  • Lower reporting costs
  • Faster delivery of reports to clients
  • Smoother client relationships

However, reducing the number of custom client reports is no easy task. In this article, I lay out some of the non-technical ways to improve custom client report generation. All of these steps can be taken without investing in a new client reporting tool. In a future article I’ll dive into how vendor solutions provide the flexibility to make further improvements.

Let’s start by unpacking the causes of report requests from clients. The two main drivers for custom requests are as follows:

  1. Specific data needs
  2. Formatting

Specific Data Needs

In our 2020 Client Reporting Benchmarking Survey, we asked firms how they handle custom data requirements. No respondents are using data repositories to support custom data requirements, with most using spreadsheets with some automated processes. Using a data repository, once the data requests are stable and recurring, can help alleviate the burden of custom data requests.

Custom Data Requests: Most Firms Use Spreadsheets, Not a Data Repository

When thinking about client reporting, managers have the following three main types of data for organizing and presenting material:

  1. Expected Data: First, they need to support the common component expectations of their clients. If you’re looking for more on this topic, check out our recent infographic. Although the common components are different for various asset classes, client expectations don’t vary as wildly within an asset class as you might think. For example, fixed income clients are going to expect details on yield, duration, quality, maturity, etc.
  2. Investment Narrative Data: Second, client reporting staff need to have a strong sense of the investment strategies that they support. Various managers, strategies, and products have unique stories, and client reporting staff need to tell those stories using tables, charts, and commentary. For example, the story told by a highly concentrated equity manager is going to differ greatly from a sector index fund.
  3. Non-Investment Narrative Data: Lastly, client reporting staff need to provide data that doesn’t support their client reporting narrative but is of interest to clients. Just because your firm doesn’t find a data point particularly germane to your investment philosophy doesn’t mean clients won’t expect it as part of their standard report.

Client reporting staff may find themselves in trouble when they’re not prepared to support all three types of data. The list above is also ranked by maturity. Most firms are prepared to provide the data most clients expect relative to an asset class. Forward-thinking firms use data to tell their story ─ that is, their investment narrative. These firms are rooted in their brand story and carefully construct the client report to reinforce that story with their clients. This can also lead to a blind spot. Firms can focus too much on how they want to tell their story, but forget that they’re producing a “client” report. The document is in the service of the client, so firms need to provide clients with the data they require, regardless of whether it fits the story the firm wants to tell. If client reporting staff neglect any of these three drivers, they will see an increase in custom report requests.

While client reporting staff can prepare and react to client data requests, handling formatting requests are a bit more difficult.

Formatting Requests

Without the aid of a client reporting vendor solution, managing formatting requests usually will result in a new custom report. Vendor tools provide features to manage your standard report to support various formats, but we’ll explore that in a future article.

Let’s step back and consider the reasons the clients make formatting requests to asset managers.

  1. The client wants all the investment managers they work with to put information in the same format. This makes it easier for the client to consume information.
  2. The client wants specific data in a spreadsheet format to put into an internal system. By using a spreadsheet, this allows clients to upload the data and do their own analysis.
  3. Client preferences are another reason. For example, some clients want to view particular time periods or they prefer charts instead of tables.

While client reporting staff can be proactive in understanding what clients need, there’s just not much they can do without a tool. Formatting requests, like the need for specific data, increase the number of custom client reports needed. And each additional custom report is a drag on resources and costs, and impacts the time to produce the reports.

Now that we’ve covered how data and formatting requests affect the number of custom reports a firm has to manage, let’s move on to what firms can do about it, even without a client reporting vendor solution.

Understand New Client Requirements Up Front

Unfortunately, client reporting teams are not often brought into the loop during sales negotiations. Not that the client reporting function is a “make or break” component in winning new business, but client reporting is too often treated as an afterthought. Only after the ink is dry on the investment management agreement, do the client’s reporting requirements (e.g., client-specific benchmark, more frequent reports, custom reports) come to light.

Understanding the client’s reporting needs is a key component in the overall cost to support the client. These costs are incurred each reporting cycle (e.g., monthly, quarterly) for the life of the relationship. Depending on the client’s requirements, this can add up to multiple FTE days each year. Multiply that by each custom report, and the overall cost of client reporting can escalate as new employees must be added to manage the reporting load.

Rather than being an afterthought, bring up client reporting during the sales process. The sales team can show the standard report, leading to a discussion about client-specific needs. If they exist, the client reporting manager can discuss the cost to support the new client’s custom reporting needs. The key is to understand clients’ requirements up front and include the requirements as input to the sales negotiation process.

Client Management

Earlier, I outlined the reasons for custom requests, but what’s not known is how hard and fast a client’s requirements are. Because the client reporting costs are not always well understood by client service representatives, and because the representatives are eager to be viewed as “client-centric” by the client, they often take the client requirements at face value.

From our 2020 Client Reporting Benchmarking Survey, we know that most respondents do not consistently follow a standard process for requesting custom reports.

If your firm does not have a process or if your process needs to be revisited, consider following a simple process to manage custom reports while still respecting the client’s needs.

Process for Managing Custom Report Requests

  • Step 1: Client service representative completes a request form in which they describe what the client is asking for. Where applicable, they obtain a sample format from client.
  • Step 2: Consult the client reporting team to identify where client's needs diverge from the standard report.
  • Step 3: Where possible, provide client with modifications to the standard template that may meet their needs, but at a lower operational cost to the firm.

This should be a nuanced conversation. Certainly, you want to meet all of your client’s needs, but you also want to manage the cost of client reporting and avoid negatively impacting your ability to produce reports quickly.

Addressing Custom Report Requests

Custom requests are a challenging aspect of client reporting. If your firm wants to know the strengths and weaknesses of its standard client reports, Cutter Associates now provides a Client Reporting Assessment service. The assessment evaluates your client reports and compares your reports against industry best practices.

If you have any questions, or would like to get your assessment started, contact us at [email protected].