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Portfolio > Alternative Investments

How to Build a Firm to Serve the HNW: Part 3 – New Reporting Demanded by Clients

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In Parts 1 and 2 of this series of posts, we examined two significant trends in serving the investment needs of high net worth clients. The first in the series focused on how leading RIA and multi-family office firms have determined that hiring more staff to offset deficiencies in off-the-shelf products and outsourced providers is neither efficient nor scalable. The second in the series focused on how the lingering bruises of the economic crisis have prompted high-net-worth clients to assume a more central role in investment management decisions. In response to the growing pressure these trends exert on wealth advisors, many of them have turned to outsourced specialists.

In Part 3 of this series, I will discuss how advisors can showcase the value they bring to the table in the face of a fast-evolving industry. Right now, advisors have an enormous opportunity to redefine themselves and step away from the old template. Sophisticated clientele require round-the-clock updates on the strength or potential weaknesses of their portfolios. In this complex environment, advisors who can stay agile and respond quickly to news that impacts the markets and their clients’ investments stand to make significant professional gains. To capitalize on the shift in expectation for robust service and greater detail, advisors can add value by utilizing the new tools and technologies embedded in a comprehensive solution that has evolved with the times to help them increase efficiency and scalability.

Finding and evaluating such a solution is the first step. Below are four critical features to consider:

Enterprise Reporting

An enterprise reporting system gives advisors the ability to view asset allocation, liquidity and risk factors not just for one client, but across the entire firm.

When the financial crisis hit, one financial firm utilized an enterprise reporting system to quickly identify all auction-rate securities (ARS) held by all of its investors. Recall that ARS were believed to be safe, liquid, short-term alternatives to money market accounts. But in 2008, the underlying debt of insurance-backed securities led to a collapse in price and liquidity. Investor holdings were frozen.

Within hours, the firm was able to notify investors of their positions in ARS and current valuations, quickly communicating new information, tracking each security, monitoring new interest rates and identifying potential alternative sources of liquidity. Without the enterprise reporting capability, damage to investors would have remained unclear until it was too late to do anything about it. This system ratcheted efficiency up to a level that allowed for risk mitigation, and not simply a too-little, too-late response to it.


For advisors and clients, the “how” of what is reported is as important as the “what.” Transparency, delivered in a customized and accurate way, becomes essential, especially in the wake of the 2008-2009 crisis. Today, advisors are being held to a higher standard than ever before. What advisors don’t know about an investment before recommending it to a client might hurt them. 

Alternative investments present a challenge on two fronts. First, more investors are looking for alternative strategies, putting pressure on advisors to provide greater levels of transparency and due diligence. Alternative funds carry higher


buying and selling expenses and, more important, demand far more time and specialized experience to evaluate correctly. With less or no public information, this can be tough.

While alternatives require significant proprietary research, they can yield significant information and a level of detail that allows advisors to determine how these holdings might be impacted by volatility in the world and the marketplace. Again, here is an opening for advisors to differentiate themselves by delivering access to in-depth information in a way that links to the reporting system.

Take, for example, recent events in Libya, a country politically and economically tethered to oil. With hedge fund exposure to that part of the world, clients expect advisors to identify and minimize emerging risk. Without transparent information about underlying holdings delivered quickly and accurately, risk mitigation becomes more difficult.

In terms of customization, remember also that HNW clients like to monitor their accounts closely every day. The ability to display specific information and the depth to which they are able to view multi-generational holdings across all managers is important to them. It also allows them to restrict the depth of access to account information by family member and other involved parties. In terms of accuracy, the technology solution should have the capability to eliminate the inevitable loss of efficiency and accuracy when more people have access to data.

Timely Information

As I’ve mentioned before, the new paradigm demands 24/7 access to news and information to determine risks, opportunities, insight, trend-spotting and investment tactics at lightning speed. Everything is moving faster, including wealthy investors. For advisors, this presents a tremendous opportunity to move with them and anticipate their needs. The key word here is: timely. Certain types of investments lag in reporting systems. Because of the reconciliation process, even the most-automated, accurate and timely information can be reported days behind the market.

A boutique firm we know that exclusively serves billion-dollar investors began targeting its practice 100% to alternative investments. Unlike stocks or bonds, alternatives reporting requires retrieving statements from custodians or fund managers and manually entering the data into a reporting system. The firm’s data aggregation partner at the time entered data manually—a cumbersome two-person job, with each individual entering data separately. The system then flagged discrepancies between the two data sets before reconciliation.

While this process was accurate, it could not keep up with investor demand for access to their investment information. Result: a sluggish reporting system that failed to fulfill client expectation.  

Advisors can keep pace with the demands of the investing elite by arming themselves with the latest tools for rapid access to data. Technology, such as optical scanners, facilitate the aggregation of data so that retrieving account data, condensing and interpreting it for investor consumption moves as close to real time as possible. Advisors have a chance


to take it up a notch via a system that syncs with reporting systems and that can interpret and compute valuations and performance reports.

Success with HNW clients for advisors on all investments comes down to the ability to provide data through an integrated system that streamlines and automates reporting and puts the information into clients’ hands when and how they want it.  


Our increasingly complex economy has been further complicated by globalization. Offices, clients and investments interact from every continent and time zone. Reporting in multiple currencies has become standard, especially with HNW clients. The ability to track multiple investments in multiple currencies for multiple clients presents an excellent way for advisors to distinguish themselves in an increasingly crowded field. It’s no longer simply a matter of converting foreign currency to the dollar. Local markets play a unique role in the investor’s portfolio, and here is a chance for advisors to find and act on opportunities in those markets, no matter what currency it utilizes.

Advisors and their clients want to stay sharp in this market, mentally transitioning between countries and asking questions, like “Where are we?” “How are the investments doing?” “What are the risks?” Ideally, the answers are integrated into every decision before it is made—not after, when it might be too late to avoid a loss.

HNW investors understand the global environment. Advisor can retain these clients, and attract more like them, by ramping up their level of client service through automated currency capabilities that are built into the reporting system.  

Series Wrap-Up

Today’s HNW clients expect to become fully engaged partners in their financial success, which creates an opportunity for advisors to grow their business simply by putting the client relationship front and center. From there, every function, service, decision and discussion can serve to strengthen and reinforce investor trust.

Advisors can begin fulfilling these expectations by partnering with the most advanced technology provider available. With streamlined staff, greater efficiency and scalability, they will be better positioned to focus on the client. The world of investments is no longer about performance, but about engaging in strategic conversations and enabling investors to assess risk and determine the status of their investments with unmatched data aggregation and consolidated reporting that offers greater transparency and governance, as well as in-depth analytics that accurately assess performance. Expectations are high. With the right tools and services, the rewards can be great.


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