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Communicating value to clients

This fourth article in a series of six is written by Paul Watthey, director of marketing, Advent Software EMEA.

Family offices are characterised by their provision of high touch, bespoke services. So while investment performance that meets the financial targets of the sundry family members is the ultimate measure of a family office’s success, effective and frequent communication with clients is an essential part of their offering, especially when markets are volatile.

For one, clearly communicating to clients how their assets are allocated and the returns their portfolio is achieving demonstrates that the family office is doing its job, and is earning its fees. But more than that, by giving family members comprehensive but digestible information on their financial position they will be better equipped to work with the family office in formulating a financial roadmap, and ensuring that both parties are agreed on the direction they are going.

The families concerned then will want up-to-date records of their total wealth, with a breakdown of the holdings, transactions conducted and returns achieved by asset type, as well as the ability to monitor income and expenditures. For the family office that raises the prospect of gathering details on a complex array of financial and physical assets being handled by a range of managers, oftentimes to meet the disparate financial goals of various family individuals.

Effective client communication then places certain demands on the family office. For one it will need to obtain an aggregate view of the client’s holdings and positions, wherever they happen to be, so that it has complete and accurate account information at hand. It must also subject the portfolios to rigorous performance analytics.

Armed with this information, the family office needs to create detailed but intelligible reports that it can send to its clients. What is more, because it is likely to be serving multiple generations and members of a family – with their different financial status and literacy, and technological sophistication – the firm should be able to customise those reports according to each client’s specific needs and preferences where required.

Likewise, the family office will want to test the portfolios against different scenarios, such as changes in interest rates or market movements, and assess the impact of alterations to their investment strategy on the financial goals of their clients. That information can again be reported back to the family concerned to enable both parties to regularly appraise their current position and future course.

And in addition to client reports, the family office should generate reports for relevant interested parties. For example, the family’s tax accountants and lawyers will need to be informed about the position of the accounts as well.

Client communication though is not just about periodic investment performance feedback in the shape of monthly, quarterly and annual reports. Great service also means ensuring there is a personal touch, having alerts set up as reminders to contact someone when previously agreed, being responsive to any ad hoc demands, and proactive in discussing investment opportunities or challenges on the horizon.

But achieving this level of service is impossible unless a firm has a sophisticated technology framework in place.

That includes having tight integration between the family office’s portfolio management/accounting system and its reporting engine to ensure an automatic feed of data from one to the other. It also means having a robust and flexible reporting engine able to handle all asset types – including the gamut of securities instruments, as well as physical items such as houses, yachts and artwork – and that can be configured to quickly and easily generate standard or individualised reports according to clients’ demands. In addition, these capabilities should be linked to a customer relationship management (CRM) system so they can provide reports and other information of interest to clients when they want it and in a personalised way.

With this type of infrastructure, the reporting process can be completed much faster at period end, since it won’t require employees to compile and input data from multiple sources, run and print the individual reports, collate the packages and send them to the relevant people. Automation also guards against inaccuracies creeping in from manual intervention, is more cost efficient, and frees up significant operational time, allowing staff to focus on other higher value activities. And because they are not tied up on mundane administrative tasks, employees are likely to be more productive, more motivated and more likely to remain with the firm.

Crucially, client satisfaction will be higher with this faster, more accurate and more customised reporting process too.

In short, a cutting edge technology infrastructure means the organisation can concentrate on maximising investment performance and customer-facing activities, while having the scalability to grow their business in a cost-constrained way, and all the while providing the exemplary client service that must be the hallmark of today’s family office.

Click here to learn more about how to Achieve Operational Efficiencies in Families Offices and register for our web seminar on Thursday, 26th March, at 2.30pm GMT.

Click here to read the first article in the series.
Click here to read the second article in the series.
Click here to read the third article in the series.

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