Roller coaster ride of client reporting
The largest increase in the demand for performance training is coming from those working in client reporting. To understand this demand we need to understand the role of the client reporter.
Client reporting in the 1980s generally required a broad range of skills: daily running of cash positions, monthly/quarterly reports, client meetings, answering client queries and the manual completion of WM/Caps data sheets. Reporters needed some very basic performance knowledge, but as long as the market valued, purchased, sales and income reconciled to the quarterly report, everything seemed in order.
Five years later, many client reporting jobs would have been unrecognisable. Increased automation had changed many functions and client reporting had become a victim of specialisation and economies of scale. Client liaison officers and client relationship managers had taken over the client contact function. Client reporters still had a basic performance role, but would be unaware of attribution, risk-adjusted returns and how to manually calculate a return. The manual task of completing internal/external performance spreadsheets had been replaced with automation, further displacing them from understanding performance.
Performance measurers and reporters would liaise together to resolve problems with internally and externally verified returns. Often this relationship was characterised by the lack of knowledge from the client reporter, and a lack of sympathy as to where and how their role could impact accuracy. This state of affairs was difficult for both parties. Reporters would feel inadequate, with not understanding the meaning of the ‘end deliverable’, and how to calculate a return of five per cent. Measurers would feel they needed to spend too much time checking and verifying data. This took them away from their preferred role of analysis. Didn’t Jim Trotter of Northern Trust state that 80 per cent of a performance measurer’s time was spent verifying and checking data rather than analysing it? Maybe, but in all probability this was a hangover from the initial GIPS verification processes.
I think it is important to stress the role of the client reporter, memories of which still surface from time to time from my UBS days. There used to be a general feeling, rarely voiced, that the client reporting role may have been de-skilled, and all that was left was just checking valuations and putting reports in jiffy bags (this was, lest we forget, pre-PDF days), as one fund manager lovingly remarked to me once. Naturally, you had the added task of checking if the client address was correct, and taking all documentation to the post room. But there had to be a better use of resources than this – too many bright people were being under-utilised.
Thankfully, over the past five years, we’ve seen a marked improvement. Performance reporters have taken on additional skills, bringing greater responsibility. They can provide a ‘first check’ on performance numbers, and spot errors at source. They ‘add value’ to the process. More and more often nowadays client reporting teams can understand the investment process more fully, and are able to dovetail this new understanding into other aspects of their roles and responsibilities. In other words, the institutions are getting more from their people by challenging them further than ever before.
Hopefully, this will allow performance measurers to spend more time doing what they should be doing, that is to say interpretation, analysing and explaining to fund managers/clients. It is also important that we do not neglect their role in product development. You never know where the latest great idea will germinate, but if people are thinking more critically, surely it is far more likely to happen than not.
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