Howard Corey, who has more than 15 years of financial services industry experience, joined Cutter Associates in 2021 as a Senior Research Analyst. Howard’s broad experience in both wealth and asset management includes client services, portfolio operations, multi-asset class trade execution, and client performance reporting.
Before joining Cutter, Howard was a Wealth Advisor with Shorepoint Capital Partners. His prior roles include Chief Operating Officer at One Charles Private Wealth, an SEC Registered Investment Adviser, and Principal at Partners Capital Investment Group, where he managed the US Client Services Team and was responsible for multi-asset class trading and client reporting for both private and institutional clients.
Howard earned a bachelor of arts in economics from Roanoke College and an MBA from Vanderbilt University’s Owen Graduate School of Management.
Nov 30, 2021
What's the future of client reporting for wealth clients?
My colleague Cindy Sealey recently wrote an insightful and provocative blog post, titled Is Client Reporting Dying? You read it, didn’t you? Well, if not, check it out.
Her main argument (something that’s supported by our 2020 Client Reporting Benchmarking Survey findings) is that we still live in a PDF world, and that the entire client reporting process is likely to soon be disintermediated by the client portal. The article was written with the institutional asset manager in mind, but I would argue that the piece’s most important takeaway ─ “institutional managers will be pushed to become more client-centric and provide client reporting data in a manner that clients prefer” ─ also applies to wealth managers.
The bottom line is as follows:
Paper-based client reports are dying a quick death, and this applies to both wealth and institutional asset managers.
PDF client reports, typically sent via email, will gradually be phased out of wealth management because they do not permit the customization that wealth clients are already starting to demand from their wealth managers.
Does this mean that client reports are soon to be consigned to the dustbin of history? Absolutely not.
Does it mean that the delivery mechanism of snail mail or even email will die off? In our opinion, absolutely yes.
Regulators will always require some form of reporting (typically a monthly or quarterly statement) to be delivered to clients from an investor protection standpoint. It’s also highly unlikely that regulators will start accepting alternative forms of client reporting any time soon — the PDF is likely here to stay, at least in an administrative capacity.
But the delivery mechanism will gradually shift from paper and emails with PDF attachments to being uploaded to a client’s portal. We already see this picking up speed in the industry, with firms offering incentives for paperless delivery and even no longer offering clients the option of receiving mailed copies of their reports. This goes far beyond regulatory reporting requirements, representing a seismic shift in the industry around how portfolio and financial information gets consumed by a wealth manager’s end client. While regulators may continue to require PDFs, this form of delivery won’t keep clients happy for long in a world of interactive graphics and cutting-edge UX/UI.
The Wealth Backdrop
To really understand the ongoing changes in wealth client reporting, one needs to first have a broad grasp of the seismic changes currently underway within the wealth management industry itself. Two meta trends ultimately impact the client reporting function ─ the changing wealth management value proposition and shifting wealth client demographics.
A changing wealth management value proposition
The underlying value proposition of wealth management is evolving ─ from a past when wealth advisors acted primarily as portfolio managers — simply overseeing a portfolio of equities and/or bonds on behalf of their clients ─ to being a life coach who oversees all aspects of a client’s wealth and financial wellness. For example, today’s wealth advisor may manage client portfolios, help clients determine their near- and long-term financial goals, and translate these inputs into actionable financial plans. Due to this expanded scope of responsibilities, the traditional set of portfolio reports that may have included asset allocation, investment performance, holdings, and transaction information must evolve to include more dynamic reporting around other personal financial matters, such as financial planning, budgeting, spending, retirement goals, and so on.
Shifting wealth client demographics
The second, and interrelated, trend affecting the wealth management industry concerns shifting wealth client demographics. While Baby Boomers remain the wealthiest generation, this is poised to change. Called the “Great Generational Wealth Transfer,” an estimated USD 68 trillion
will change hands in the next 20 to 30 years alone. Much of this wealth will go to Gen Xers (born between 1964 and 1980) and Millennials (born between 1981 and 1998).
But even without the money they will be inheriting from their parents and grandparents, these two generational cohorts represent an ever-increasing percentage of overall wealth clients. These two cohorts are at the peak of their wealth accumulation phase — or even, for the oldest Gen Xers, on the cusp of retirement — and their financial lives are becoming increasingly complex as they buy houses, get married, have children, and save for retirement. As such, they are increasingly seeking out financial advice, as opposed to managing their wealth themselves due to the complexity of it all.
As they pertain to client reporting, the ramifications of these changes are important. These relatively younger demographic cohorts have a different set of expectations when it comes to the end-client experience they desire from their wealth manager. They are far more comfortable using client portals and mobile apps to manage their financial affairs than their Baby Boomer elders. And the COVID-19 pandemic has only accelerated
these trends. They’re also already demanding more self-service features and functionalities and real-time overviews of their investment accounts. Recent research
found, for example, that 67% of Millennials want access to software that allows them to track their transactions, payments, and other financial data in real-time (compared to only 30% of Baby Boomers and Gen Xers).
The Client Portal: The Future of Wealth Reporting
The client portal has become the primary vehicle by which wealth managers can meet growing client demands for personalization and customization of their digital client journey ─ demands that include self-service capabilities. When Cutter conducts our client portal benchmarking assessments, the highest-scoring client portals are those that offer a hyper-personalized client experience with plenty of self-service opportunities. Self-service may be as simple as offering interactive account dashboards with drill-down capabilities. Or it could mean providing self-service reporting opportunities where clients can design their own reports using data from both custodial and held-away accounts and design the graphics used to present the data.
Customization, Data Visualization, and Account Aggregation
Given that no two client situations are alike, the terms customization and/or personalization appear everywhere within the wealth business. As such, wealth managers that provide standardized reporting templates, with little to no client input, may succeed in telling their story, but might miss out on what’s truly important to the end client. For example, I worked at a wealth firm that provided investment management services exclusively to ultra-high-net-worth clients and roughly 60% of clients requested, and subsequently received, a customized monthly performance statement.
From that personalized information, advisors were able to understand which data or metrics were important to each respective client, and thus were able to tailor their portfolio advice to meet each client’s unique goals and objectives. So, in such a situation, where over half your clients are requesting customization, this is no longer efficient to manage, no matter how many report templates that advisors store in the system. It also means that advisors and support staff must spend their already-precious time on something that should, for all intents and purposes, be automated. Or better yet, it should be a self-service capability that end clients can compose themselves.
Should a wealth manager decide to implement a true digital reporting platform and enable the option to self-service, clients can then configure, visualize, and manage reporting and/or user dashboards to fit their own unique preferences. For example, Client A may prefer a table overview of holdings, while Client B may prefer a drill-down option accessed via a dashboard infographic. Additionally, based on client interests, the portal can serve as the vehicle to deliver real-time personalized news and market content based on portfolio holdings. Quite simply, personalization and interactivity are excellent mechanisms to promote client engagement as well as to decrease friction with the new service-based wealth management value proposition.
Account aggregation is now a standard feature for most wealth management portals, and wealth managers that aggregate outside accounts have a tremendous advantage over those that do not. For one, with the ability to see and report on a client’s full balance sheet and his or her corresponding asset allocation, the advisor’s value proposition is greatly enhanced because the advice and subsequent reporting that the advisor delivers are truly comprehensive.
Because the overall story can vary, depending on one’s investment strategy, investment time horizon, financial goals, and the demographic that they service, wealth managers often need to customize client reporting commentary. Whether the commentary is embedded within one’s statement or provided via a standalone newsletter, client reporting platforms with dynamic commentary capabilities grant advisors the ability to write customized commentary based on a client’s individual or asset class holdings. Dynamic commentary helps provide that personalized feel that investors desire. As we have found during our vendor research on wealth platforms, many wealth managers have this functionality on their punch list to develop, if it’s not included already. Wealth managers looking to upgrade should have this at the top of their list when evaluating systems.
Lastly, and there are a few institutions already offering this, we’re seeing more and more wealth managers offer customized video recordings as a new client reporting medium. Admittedly, the production value of these video experiences is somewhat lacking, but we suspect that we’ll see increasing adoption of this medium in the future.
Your Wealth Experience Is In Your Pocket...
… and it’s not in a PDF buried in your email inbox or a paper report that’s sitting in your mailbox. Wealth clients today want more than static dry overviews of their portfolios. Instead, they want to have a real-time display of how their investments are progressing against their established financial goals. The experience should be interactive, allowing clients to control how they digest information and permit easy sharing with other professionals such as CPAs, or other family members. And, lastly, client reporting needs to be flexible and customizable to suit each client’s specific and unique circumstances. But the delivery mechanism must allow wealth managers to provide this information in a way that increases rather than decreases advisor efficiency.
I’d welcome the opportunity to hear your feedback. Please feel free to share or to engage in a dialogue via the Cutter Community, accessible via your dashboard at www.cutterassociates.com.