Closing the reporting gap
I recently hosted a roundtable of successful advisors talking about where they’re taking their business.We discussed the role of different investment solutions going forward. When we got to mutual funds, one of the topics which drew a collective groan is the problem caused because reinvested dividends increase the adjusted cost base shown on client statements. That’s good news at one level because the tax liability is reduced when sold – but because the cost base keeps going up on their statements, many clients believe that they’ve made much less money on their funds than is actually the case.
One advisor complained about explaining this to clients when they sign on – but still having difficulty because they forget about that conversation when they get their statements.
So who’s at fault here? Is it mentally lazy and attention challenged clients? Or is there a more fundamental issue at work?
In talking to clients about the advisors and firms they work with, one of the most common complaints relates to statements which don’t give them the basics of what they want – an easily comprehensible reading on how they’ve done over the past year and since they began working with their advisor. Most are looking for an absolute reading on this – some also express interest in seeing this compared to a relevant benchmark.
Advisors and firms provide myriad excuses why this is difficult – none of which matter to most clients. Most investors see providing comprehensible and accurate reporting as a minimum deliverable from their advisor – something which, in my view at least, is hard to argue with. Among those receiving statements directly from fund companies, more and more are looking for consolidated reporting as well.
For advisors to say that they are helpless victims of their firm’s feckless systems and IT department doesn’t wash – clients want results, not excuses.
So you have a couple of choices.
You could create two or three templates for reporting, offering varied levels of detail and talk to clients about which makes sense for them. Once a year, this report is discussed during your annual review with clients, ideally held face to face or if that’s not possible over the phone. Yes, this will chew up admin time and will be a pain to run through compliance. Increasingly, however, you will need to do this simply to be competitive. Rather than thinking about this as cumbersome and time consuming, consider the positive of telling a client that you will be creating a customized report which presents performance the way they would like to see it – it truly will be “their report”. For most, it will just be the basics – how much they invested, the amount they’ve withdrawn and what the portfolio is worth today; for a few others, the demands may be more complex.
The other alternative is to use one of the online portfolio trackers (the biggest of which is Globeadvisor) – at no cost, you can create a password protected portfolio which clients can view to see how they’re doing. Again, you will have to ensure someone on your staff keeps it current – but that’s a small cost compared to replacing a client lured away by an advisor who promises to provide the reporting which clients are looking for. Even if you don’t want to do this for every client, start with your best clients – you may be pleasantly surprised by the response and make it a core feature of your service offering.
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