Performance reporting isn’t cutting it for clients

The market turmoil is revealing deficiencies in the portfolio reporting software on which financial advisers rely.

The software is designed to produce monthly reports, not the sophisticated daily reports that angst-ridden clients have begun to demand.

Advisers who fail to provide information more frequently may be putting their practices at risk.

“Reporting is the biggest reason for wealth management client attrition,” said Robert Ellis, senior vice president and head of wealth management practice with Celent Communications LLC, a services consulting firm in Boston.

Portfolio reporting software is designed to track the performance of a client’s holdings.

For wealthy clients, subpar reporting is a major issue, he said, because their portfolios tend to contain esoteric asset classes and sophisticated securities. In addition, their portfolios are held with several custodians, and assets are denominated in many currencies, a situation that creates a huge reconciliation and reporting nightmare, Mr. Ellis said.

The problem “is made worse when the client cannot get statements on the fly with full data — and many advisers feel that their systems do not support a high and necessary level of client data,” he said.

Those circumstances force firms to address the shortcomings.

“We’re a fee-only wealth advisory [firm] and use dbCAMS portfolio management software, but we have had to custom-design our reports,” said Keith Heichel, a certified financial planner at Pinnacle Wealth Planning Services of Mansfield, Ohio, which works with high-net-worth clients and business owners and manages $430 million in assets. “The boilerplate reports [that were generated] from the software were insufficient.”

Morningstar Inc. of Chicago recently acquired Financial Computer Support Inc. of Oakland, Md., the developer of dbCAMS.

To improve its software, Pinnacle hired an outside programmer to customize dbCAMS so it could produce reports with the depth Pinnacle needed. “We still need better benchmark applications, and we only have month-ending performance reporting on indexes,” Mr. Heichel said, adding that the firm will be making do with what it has.

Much of the existing portfolio management and reporting software can produce quarterly reporting, but lacks the adaptability that advisers require.

“I’ve seen the good, the bad and the ugly in my career,” said Kirk Francis, president of Cross Financial Services, a registered investment adviser in San Antonio that manages $100 million in assets.

The firm uses the PortfolioCenter application from Schwab Performance Technologies of Raleigh N.C., but to improve on PortfolioCenter’s reporting features, which he said were somewhat cumbersome, Cross Financial now relies on the reporting features of its unified managed account service, WealthADV from Adhesion Wealth Advisor Solutions of Charlotte, N.C. That platform is used for client reporting, reconciliation and other back-office services.

“One thing about it I like a lot is that I can do reporting on the fly,” Mr. Francis said.

Other advisers have inked deals with outsourcers of performance reporting systems.

“I just can’t imagine going through the last two months without Black Diamond,” said Ted Rich, a principal at Vinoy Capital LLC of Winter Park, Fla., which manages $150 million in assets. He was referring to Black Diamond Performance Reporting LLC of Jacksonville, Fla.

The vendor provides web-based on-the-fly performance reporting, and its reports can reflect holdings in accounts held at other firms and custodians.

Black Diamond provides this account aggregation service through a collaboration with ByAllAccounts of Woburn, Mass.

More than 200 wealth management firms use ByAllAccounts to reconcile financial account data from thousands of custodians to conduct performance analysis and to prepare reports.

Nonetheless, rectifying performance-reporting problems takes time, delaying the generation of client reports.

“The problems [for us] stem from the fact that the data coming from the various custodians doesn’t always come in clean,” said David Demming Jr., founder of Demming Financial Services Corp. of Aurora, Ohio, which manages $300 million in assets.

In response, the firm hired a full-time employee who has been reconciling data for 15 years, but with mixed results.

“That’s a big drawback to the system. Great reports equal high labor costs and someone who can manage the database,” Mr. Demming said.

E-mail Davis D. Janowski at [email protected].