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How wealth managers can avoid scattershot approach to alternative investment communications


With HNW investors concerned over the future performance of their traditional portfolios, the last two or three years has led to an increased desire for alternative investments. Such is the scale of adoption that a Strategy & report entitled “Alternative Investments: It’s time to pay attention”, forecasted last year that alternative investment assets could grow from USD10 trillion to USD18.1 trillion by 2020. 

This is placing huge pressure on wealth management firms when it comes to providing effective client communications. After all, alternative investments are an entirely different, complex reporting proposition. The problem for wealth managers is that they still rely on dated, manual-intensive communications, largely using print and email that are ill suited to the scale of the task at hand. 

At the heart of the issue is the lack of a centralised repository to help smooth the client communication process and ease pressure on operations teams.  

This issue formed the focus of the latest in a series of webinars hosted by Intralinks, entitled: “Avoid the Scattershot Approach to Client Communication: Transform Your Alternative Investment Reporting for Wealth Management Clients”, which was hosted by Glenn Schwartz (pictured), Vice President of Professional Services. 

Framing the challenge

A typical wealth management firm will have access to anywhere between 100 and 400 different types of vehicles and funds, each of which requires different communication vehicles for fund reports, statements, K1s and other tax documents. This requires them to send out a huge amount of content and documentation on a regular basis as more of their clients allocate to alternative investments. 
“As there are so many direct offerings and feeder funds handled by wealth management firms, the distribution process for this type of content – whether it is K1s, capital calls, investment statements etc. – has become much more complex with respect to how wealth managers send that information to clients in a steady, timely and predictable way,” says Schwartz. 

Part of the challenge, aside from the sprawl of fund products that exist for clients to consider, is the large array of financial instruments that wealth managers have to keep track of. To try and cope, wealth managers are putting complicated processes in place. This, in turn, is placing increased pressure on the operations groups to get the content under control. 

“The reason for that pressure also relates to the fact that the advisor community is itself under a lot of pressure from end investors. They are asking their advisors, ‘Where is my content? How can I access it? Can you please go and find it for me?’ and so on.

“There are so many fund offerings, operational groups don’t have the wherewithal to get everything in order and distribute it in a uniform way. Consequently, some wealth managers have pushed distribution on to the transfer agents, or the funds themselves,” says Schwartz. 

More administrative work

Schwartz refers to one global bank that encouraged its clients to go to the web portals of the funds they were investing in to receive the necessary content from managers. 

The problem with this is if an investor subscribes to three or four different funds, they might find themselves having to do administrative work on each of those funds. Also, because the advisor has the necessary expertise in understanding the paperwork, they too are drawn in to the process. 

In an extreme case, an advisor would have to keep track of their clients’ information coming from each and every fund they subscribe to. This would quickly become untenable, especially if the advisor has tens or even hundreds of clients. 

“That is why advisors are putting pressure on operations group and asking, ‘Why can’t you aggregate and put all of this information in one place?’” says Schwartz. 

Loss of control

When wealth managers push the problem out to transfer agents, they lose control over communications with clients. The content is not delivered in a timely way, it can be difficult to control if the investor has multiple residencies (which many HNW individuals do); this can lead to a poor client experience.

Even if the wealth manager does send the client communications internally, they will often be using technologies that are 20 years old or more. They use systems that rely on producing paper documents that are then either sent or, if the client happens to opt for electronic delivery, sent via email (after digitising the images). They hope to get as much information as possible from transaction systems, they do a giant mail merge at the time of distribution, and then hope for the best. 

But as Schwartz points out, none of this content is ever stored for future reference. Nothing gets archived, meaning advisors and investors have no way of retrieving historical documents. 

“Say you have something that relates to your taxes and you need a K1 from a couple of years ago, and the email accidentally got deleted or the print document got thrown out. How do you go about retrieving that information? You would have to go to your advisor, who in turn would have to work with whoever it was that generated the K1 and so on,” comments Schwartz. 

The solution

Intralinks is able to leverage its 20-year M&A heritage to provide a platform solution specifically to help wealth management clients improve their communication processes. This is referred to as the Intralinks Collaborative Content Platform. 

“We are uniquely placed to provide such a repository as compared to other enterprise content management platforms as we can provide true collaboration. We have long provided virtual data rooms for people to review M&A documents securely, message each other, and so on. We leveraged that collaborative repository and are now applying it to this client communication process for wealth managers,” explains Schwartz. 

When wealth managers started approaching Intralinks the aim was to overcome client retention issues. In short, the belief was that by providing access to communications on an ongoing basis, wealth managers would improve client satisfaction and increase business revenues.

Intralinks addressed the challenge by taking a re-engineering approach to create an e-delivery solution using the platform. 

“We asked these clients: What is your current work process? What are the individual steps in that process? We were then able to break things down into three main process buckets. 

“The first process is what we call “Content Submission and Aggregation”. Whether it is direct funds (partner content) or feeder funds (company content), we help clients do an inventory to understand all the different sources of content, different formats, and then put a front-end solution in place. We set up assembly areas, known as collaborative content exchanges, where each fund will have its own highly secure area. 

“The second process – Content Assembly – is how to organise, secure, process and store content. The third process (Content Delivery) is how to go about delivering content and making it available to investors on an ongoing basis,” outlines Schwartz.

With respect to Content Assembly, Intralinks uses a mapping exercise to understand where all the areas of content are, what set of accounts the content will flow to, who needs to retrieve that content and how often etc. 

“This allows clients to secure the content and make sure it’s in the right area. We then apply a consumer profile to that content, prior to distribution. The first few times we do this with the client we help them put in place a process to make sure they’ve had time to approve the content and make sure it is formatted properly,” remarks Schwartz.

The Content Delivery process makes sure that the content ends up in secure areas associated with the accounts and that the proper access permissions are in place for the content folders to enable investors to review the content via the portal, or via mobile access. 

Most wealth management firms will do this in a staged way where they provide secure access to the advisors first, after which they bring investors in to access that content. 

“The last stage, which is the vision for the industry, is for a secure collaboration repository like the Intralinks Collaborative Content Platform to be used for securely sharing information between advisors, investors and their trusted third parties such as tax attorneys and accountants,” says Schwartz. 

Three clear benefits

There are three clear benefits to the central repository solution:

Firstly, it relieves the pressure on operations teams. Instead of being bombarded by thousands of emails from funds, they can use an automated process based on the mapping of investors to accounts. Secondly, in terms of quality, the automated process ensures that the right audience has access to the right content. Finally, it improves advisor productivity. 

“The ad hoc approach that wealth managers are using now will not get them to the operational efficiency and client satisfaction levels that are going to be needed to scale these alternative investments,” concludes Schwartz.

Higher client satisfaction will mean fewer redemptions and the opportunity for wealth managers to enjoy incremental AUM growth and revenue upside.

To listen to the webinar in full, please click on the following link:

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