Information at the touch of a button

Improving communication with clients is undoubtedly a top priority in all private banks’ agendas. The market downturn of the past two years, the collapse of Lehman, the Madoff fraud and the seismic shocks suffered by the biggest private banks, which affected the whole of the industry, has deeply shaken investors’ confidence in their wealth advisers; reporting to clients timely and effectively is therefore key to gain back their trust. “Keeping clients informed is vitally important – there is nothing that the client dislikes more than not hearing from their relationship managers. There is a need to keep clients up to date with their financial matters. That could mean something as simple as the value of their portfolios,” says Stephen Taylor, director of MBA Systems.

Wealth managers have traditionally relied on monthly, quarterly or even yearly reports to keep their clients up to date. Although these remain a very important medium for some clients, they alone are inadequate to meet increased demand for information. Secure portals on the internet which enable clients to long on and obtain up to date daily portfolio information have been available for some years.

Now a new service solution from MBA Systems called Portreport, has been specifically designed to enable investment and wealth managers to deliver summary client valuations and reports securely to portable handheld devices. “Often clients are travelling and increasingly the PDA [Palmtop Computer Device] has become their favoured communications medium. To be able to receive that information to a handheld device becomes even more valuable,” he says. The Wealth Passport – which is the Northern Trust owned internet based proprietary system, giving access and transparency to all the ultra-high net worth clients’ assets in custody at the bank – proved particularly helpful during the crisis, explains John Craig, strategic business development manager at Northern Trust bank.

Drilling down A few years ago, the bank tailored an extensive institutional platform of custodial services to the ultra-high net worth clients, which are the institution’s target segment in the Emea region. “Clients can see what their assets are worth, get the net asset value as of last night’s prices, at very high level, or they can look at the sector exposure, at the currency exposure and they can start drilling down right away down to the underlying securities. It is a real live picture of the client’s assets that are held on our custody system,” says Mr Craig. “For a wealthy family, which has a lot of different investment pots, putting all their assets into custody with Northern Trust is an effective way to aggregate them all in a secure place.

There is far greater risk awareness and the use of tools like wealth passport and the power of the custodian is seen as part of improving their overall risk management of their assets,” he says. Mr Craig knows of a patriarch from a wealthy family who, while on holiday, wanted to know his exposure to Lehman, just before the investment bank collapsed, and had to wait for three weeks before his family officer was able to assimilate his exposure through the different fund managers and underlying investments. “If that client had been with Northern, they would have clicked three buttons and they would have had their total exposure to Lehman.” The system can give restricted access to the portfolio to different passport holders, be it the children of a patriarch or an investment adviser.

On the Wealth Passport, clients also have access to the performance analytics reports that are produced by the custodian bank on a monthly and quarterly basis. Clients will also be able to see the screen through a mobile device, but any form of drill down would be a bit more restrictive on it, says Mr Craig. “Regulation is going to be an ever increasing burden which cannot be met purely by manual process, but it has to be built into the systems and processes,” says Bruce Weatherill, independent consultant and founder of Bruce Weatherill Executive Consulting.

Virtually every jurisdiction in the world has the requirements to treat customers fairly, mandating that investment portfolios are built in line with the risk profile and individual preferences of the client. “A bank needs a process where it can demonstrate that it is actually controlling the client mandate, electronically, rather than relying on each of the relationship managers to perform, because if you are doing that, you are prone to human error,” says Mr Weatherill.

According to research findings from financial services provider Sapient Global Markets, around 80 per cent of private banks operate at between 80 and 100 per cent of capacity. “This means they can’t scale their operations to meet the growth they anticipate, they can’t cope with the increased regulatory reporting requirements and they can’t cope with improving their front office client experience,” says Mr Weatherill, who was consultant to the study. “Therefore they are bound to operate with more errors and more problems and more inefficiently.” Although all private banks wish to move forward to better systems, some are going to find it very difficult to be able to afford it, he says. “Those wealth managers that have scalable systems and processes will be able to serve clients better.Those will be the ones who will move ahead.”

According to the research, over the next couple of years, 90 per cent of the chief operating officers at private banks want to reduce manual processes and provider better information through the relationship managers, while 80 per cent want to reduce the paper statements sent to clients, and 70 per cent are looking at ebusiness applications to allow their clients online access to portfolios.

Automated process Callum Licence, COO at UBS Wealth Management in London explains that recent investments made in the portfolio management area are part of a significant investment programme which started 3 years ago at the firm. In the UK the bank recently acquired a portfolio management tool, which has been customised to its needs, automating processes that used to be manual, such as for example order generation.

It also allows advisers to run modelling scenarios, or ‘what if’ scenarios, on an automated basis. “A manual process takes longer, whereas if it is automated, we are able to react far quicker to market movements and to client requests,” he explains. Big enhancements in client reporting systems were driven by UBS headquarters in Switzerland and rolled out with some tailoring to each country globally. These range from the look and feel of the report to real enhancement in the areas of alternative investments, like private equity and hedge funds, says Mr Licence. “Valuations can be a bit more complex for private equity and we’ve made changes to make reports easier for clients to understand. We find there is an increasing demand for a far more granular and clearer reporting.”

Enhancements in the reporting in the hedge funds space was driven mainly by the need to show on client statements the existence of side pockets or gating, to which many hedge fund managers resorted during the crisis. Turning to the future, Mr Licence states that they are looking at “anything that makes it easier for client advisers to do their job and offer better service to clients.” Because of increased regulation and investment suitability requirements means that there is a lot of administration that client advisers have to do,” he explains. “We can invest more in making this happen more efficiently because every minute our client adviser spends filling in paper work is a minute he is not spending talking to a client.”

Varied preferences As to the means used to communicate with clients, there is a huge variation in client attitude and preferences, says Mr Licence. “Some clients get very annoyed if we send them too much paper and some other clients ask for more.” All client reports are now available online as well as via the post, and clients who elect not to receive anything in the post receive an e-portfolio so they have a security token they can log in, he says. “Any document that we send them or would have sent them in the post is available online, as a PDF for them to download,” explains Mr Licence. “They can also run customised reports. So typically clients may be getting a monthly valuation statement, but then they can go online anytime and run a bespoke statement to get the valuation straight away. We then have quarterly, half yearly or annual performance reports which are more comparative,” he adds. Gaining online access to the daily value of total assets in portfolios, or exposure to sectors or managers, is not something that interests high net worth clients, states Mr Licence.

“We typically find that our clients tend to have those conversations more with their client adviser, rather than sat at home in the evening and doing in-depth portfolio analysis themselves, as they trust us to manage the money for them. Clients do go online, look at their monthly statements, but if they have a query then typically we will get a phone call the next day.”

Hubert Musseau, COO for Wealth Management business at BNP Paribas in France, also believes that the internet access is definitely an area where the firm is going to invest further to improve the look and feel of reports for the clients, but some things will never be fully automated. “For example, in the Lehman or Madoff crisis, in a few hours we had a good assessment of global exposure to client, but we needed three or four days to have a clear visibility regarding all the products and portfolios,” he explains. “The financial crisis has had a lot of indirect impacts, as well as direct impacts. It was quite hard to have a full assessment of the impact of Madoff or Lehman, in terms of valuation or liquidity. You can’t just push one button and have all the information you need,” says Mr Musseau, specifying that Madoff assets were not in any discretionary client portfolios, but the bank was only custodian of those assets.

Nevertheless, internet and online access remains a major area of investment going forward, says Mr Musseau. “We want to be able to propose a robust and user friendly internet platform – where the client can have access to some key financial information to his portfolio statements at any time and have the correct valuation updated to the last operation he made (including through the internet site), and where he will be able to make a lot of simulations or analysis regarding the performance. We want to provide this for all the clients, not only for some key ultra high net worth clients.”

Managing relationships Another area where investments are going to increase is in the CRM (customer relationship management) space. “CRM tools, based on the information that we have on the clients, allow us to have the right approach from a commercial point of view and from a suitability point of view, as it gives us good indication on what products we should promote, according to the client risk and behavioural profile.” Tax reporting is also another area of focus, as more and more offshore clients need to declare their income and ask the bank to feed them with some key information for the fiscal declaration on the resident country.

Client reporting in general is very important. “We used to invest a lot in the back-office system 10 years ago, but now we just make sure that this is compliant, it gives good support and it does not have any issue from an operational point of view, but the bulk of our investments go to our core tools, to our portfolio management and CRM systems,” says Mr Musseau.