A few years ago I used to have the job title of Investment Tools Manager. Having the word tool in your job title at least ensured I got a laugh every time I started a presentation, but it also meant I spent a lot of time reviewing the adviser market to see what reporting and planning tools were being used, whether these were on or off platform, and what the best of breed looked like. At the time we identified a number of trends. Increasingly advisers were wanting to adopt external off platform planning tools to help deliver their investment proposition. Advisers were nervous of using a platform supplied risk profiling and asset allocation tool, but more importantly wanted to keep their investment proposition as separate from their selected platforms. The investment proposition then becomes common across whatever platforms are used, and if you decide to change platforms it shouldn’t directly impact the how the investment decision is made. As a consequence, we have seen a steady increase in the use of tools such as FinaMetrica, FE Analytics and others.
Client reporting is different. Whilst all major adviser back offices systems, for example Iress, will allow advisers to produce valuation and performance reports these systems are not without their challenges. The amount of transactional data that a typical platform account accumulates over time is significant. Purchase price, fee deductions, income, distributions, rebalancing, fund switches, top-ups, rebates etc etc. The list goes on, and for a truly accurate report that you would want to put in front of your client everything needs to be included or the results are worse than useless and potentially misleading. This can be achieved within a back office system, but it requires a disciplined approach to data management, especially where the client is holding assets via multiple providers. Increasingly however, on platform reporting allows advisers to produce a report that not only looks good but is available at a few clicks and most importantly contains all of the information required.
However, this seemingly simple requirement for platforms to produce a report showing the true performance of a client’s portfolio is still something a lot of providers struggle to meet. We recently spent a few weeks with all the major platforms (more fun than it sounds), getting a demonstration of their systems and reporting. There were two big points of differentiation we noticed. Firstly, there are still an awful lot of paper authorisations needed for most platforms, with a huge inconstancy across different providers for when signatures are needed, for example adviser fee authorisation. We’ll explore that in more detail another day, but of more relevance to this blog we also noticed a wide variance in the quality of the client reporting.
Quality is clearly a subjective measure, but there is no doubt that some reports look better than others, and some won’t allow the adviser to add in their own logo. The harder measure of report contents is where the differences are found. If you want to show the client the true performance of their portfolio, accounting for money in/out, in both % and money weighted terms then there are very few reporting tools that can deliver this.
Earlier this year the FCA reminded advisers of their obligations for platform due diligence, and in particular the need for a “culture of challenge” to feature within the adviser firm. Platform due diligence is another blog in its own right, and needs to focus on a number of factors, but we would urge advisers to consider the service proposition they want to offer to their clients, and to challenge their platforms to ensure they are up to the task.