In the world of financial technology, the maxim is always to look forward. In such a fast-paced environment, learning from the past is often seen as less important (or less exciting) than the ‘next big thing’, be it SaaS, IBOR, Big Data, blockchain, digitalisation or whatever the latest concept is. Sometimes, however, in business as in life, we need to look back to see how far we have come and to learn important lessons from any past errors and imperfections.

Back in April 2007, in an excellent article in Funds Europe magazine entitled ‘Client Reporting: Losing Control?’, the issue of outsourcing client reporting was discussed. The article noted that:

‘Most European firms have steered clear of outsourcing client reporting, preferring to remain in the driving seat. But with ever more demanding clients and burdensome regulations, some may choose to risk it.’

My first question to a firm that raised such an objection today would be to ask: ‘Which elements of the client reporting process are you afraid of outsourcing?’ Surely not the build, distribution and tracking of reports? Surely not what or how to present information from underlying data? Surely not manager, market or portfolio commentary? Most of these tasks can be readily outsourced and/or entrusted to a suitably sophisticated reporting application today. Clearly, times have changed in this respect.

Furthermore, going back 14 years we find that the key reason for not outsourcing client reporting, cited at that time, was that companies ‘fear losing control of their client base and getting out of touch with clients’. One asset management firm was quoted as saying: “Client reporting cannot be outsourced as we need to make sure it’s done the way the client wants it”. My view is that this customisation (‘doing it the way the client wants it’) is surely the easy part – at least today. Indeed, some would agree now that outsourcing offers them more, better and greater flexibility in coping with highly varied or custom client and partner requirements.

Have then, the barriers to outsourced client reporting changed in the last 14 years? Well, in some regards they have and in others they haven’t. Whilst the shape of debate may have changed over the years, the fundamental question about ‘losing control’ is one that remains relevant and important to revisit in 2021.

Keeping control

In terms of the number of asset managers that outsource their entire reporting process, I would say that this has increased – albeit from a numerical minority – over the period, but not significantly. The majority of UK asset managers, in my experience, still produce their own client reports, be it through their homegrown systems and manual processes or via an off the shelf reporting solution. As client reporting is by definition a client-facing exercise, the need for control in this area is still a decisive factor. Fear of losing that control remains an obstacle to outsourcing – whether rightly or wrongly.

My long-held position has been that if an asset management firm works with the right partner (vendor or outsourcer) that is committed to working alongside the asset manager, the client should be able to retain control over the all-important content whilst delegating the ‘heavy lifting’ of automation and workflow management to the partner.

Scalability

The need for bespoke reports is, on the other hand, a problem that outsourcing or an off the shelf solution could readily satisfy. Client reporting can be ‘done the way the client wants it’ – and at high volumes – using careful but sophisticated automation. This reality applies to both retail and institutional reporting, but this kind of tailoring must be tempered by the need for scalability. As investment managers scale up, their businesses become more complex and their clients more diverse, the need to speed up the production and delivery of client reports becomes ever more critical. Technology has been a vital enabler for the client reporting process and the automation of client reporting is becoming widespread.

Customisation and confidentiality

Automating the reporting process will usually mean that reports will be consistently rendered from month to month. This can often be at odds with what certain stakeholders are used to; they may have become accustomed to being able to request frequent changes to the content or layout of reports from production to production. Accommodating this via an automated process is very much possible. Moreover, careful analysis can often reveal that much of the customisation that is ‘required’ is little more than ’just what the client is used to’. For example, a particular chart might have been requested many years ago but is now no longer necessary.

Back in 2007 and the Funds Europe article, confidentiality was cited as another obstacle to outsourcing client reporting. In the intervening period between then and now advances in computing technology and reduced costs of components has made managing confidential data in segregated public or private clouds so much more possible, so much more cost beneficial, I do not believe that confidentiality would remain a stumbling block to outsourced client reporting.

Sales enablement

Returning to 2007, one asset manager stated:

*”There’s also the sales side to consider. Another reason firms are reluctant to hand client reporting over to third parties is that client reports are a useful sales tool.”

Today, asset managers know that the secret to unlocking their client reports for use by sales teams is not whether to outsource or not – it’s about centralising and controlling data. Leveraging external resources (whether that of an outsourcer or a vendor) need not result in the loss of client reports as a sales tool or as part of client servicing.

Asset managers are looking for a more efficient approach, including the ability to collect data and create a presentation ‘on-the-fly’ without duplication of effort. Firms want to utilise all their branded and audited content for sales enablement, instead of continually recreating it. With effective data management, this content can now be made available through a reporting solution to create pitchbooks and sales presentations, improving the speed, quality and most importantly accuracy of sales pitches.

Relationship management

One area that I would say has progressed considerably since 2007 is that of relationship management. Most reporting vendors today will highlight the importance of reporting in client servicing, as a tool for enhancing and maintaining a good level of relationship management.

Perhaps a reflection of the passage of time, it should be noted that back in 2007 the subject of relationship management wasn’t deemed to be sufficiently worthy of a mention. Fourteen years ago, client reporting was still very much a box-ticking exercise at the end of the investment lifecycle.

Conclusion

The truth is that most asset management firms only need to outsource an element of their investment reporting (at most). That said, I do believe that this would generally still bring more efficiencies than continuing to use highly bespoke, legacy inhouse systems and manual processes. Today, the technology exists to enable asset managers to use outsourcing to produce scalable, customisable, confidential reports within the control of their own Client Reporting team – delivering value to investors and Sales teams alike.

Above all, outsourcing client reporting is not to lose control at all – it is to refocus on what’s important: the client and what asset managers must tell them. All this is possible if you work with a partner that is capable, flexible and equipped with technology that will enable you to have complete control in the areas where you need it most and carefully managed, delegated control in all other areas.

Abbey Shasore, CEO, Factbook

@FactbookCompany