Thought Leadership / Commentary / The Case for a Centralized Alts Data Management Approach
For advisors and clients, providing accurate, timely, and holistic reporting on disparate asset classes, often-times held around the world, can be challenging unless specialized reporting technology is introduced. This challenge is compounded when reporting on alternative investments, that often do not have available data feeds. Simply put, alts data management is time-consuming and can be a headache, even for seasoned administrative pros. And alts are becoming more common in UHNW portfolios. “We’ve seen allocations in alternative investments grow to 30-40% of portfolios,” said Jeremy Langlois, Chief Revenue Officer at Mirador, an outsourced service partner and financial reporting specialist firm, “so the challenge in managing and reporting on alts data is only growing.”
Furthermore, firms often service their clients with a team-based approach – a dedicated team is aligned with each family/client to provide bespoke services. This approach has many benefits for the end client in the high-touch world of serving UHNW families, most notably, having a small team with an intimate knowledge of the client’s family dynamics, financial goals and preferred servicing approach. However, the team-based approach also comes with several drawbacks, with some creating risks for the firm:
- With each administrative team deploying its own process, the firm inherently delivers different service levels across advisors. And of course, some processes are inevitably more efficient and accurate than others.
- Inefficiencies waste time and money and inaccurate reporting could leave gaps in revenue drivers to the firm (depending on the fee structure for tracking alts), not to mention potential financial regulatory issues.
- The disruption caused by using different tracking and reporting approaches is amplified should an analyst leave the firm and need to be replaced and trained.
A Better Way: Process Over Heroism
To be successful in any high-touch service industry, firms must have exceptional attention to detail. Unfortunately, mere mortals cannot be counted on to deliver consistency and accuracy over long periods of time without proven best practices and defined processes – what we like to call “process over heroism” (removing the human judgment factor as much as possible).
The best way to provide a consistent service level across any firm is through a centralized process built on best practices, and this is no different for wealth management firms tracking and reporting on alternative investments.
A centralized process provides many benefits to firms that adopt this approach:
- Enhanced branding and messaging. All end-product reports and dashboards will carry consistent branding and messaging. In short, the firm’s “ethos” will be better represented across all clients.
- Uniform deliverables. A consistent process will result in more consistent deliverables to clients across all teams, single report delivery dates, and better client expectation management.
- Better data. A process backed by best practices inevitably ensures better data cleanliness. And incorrect data on one investment can cast a shadow over an entire portfolio’s accuracy.
- Scalability. Firm growth is more easily supported with a centralized and scalable process. Don’t let inefficient processes hold back growth!
The Rise of Outsourcing
To eliminate the risks associated with the complex task of tracking and reporting on alts, many firms are outsourcing this function to specialist firms, many of them delivering slick technology solutions. However, alts data management becomes more complicated and time-consuming as alts portfolios expand, and a technology-centric alts solution is not a silver bullet.
“Mirador leverages proprietary technology to extract and label alts data,” explained Langlois. “But what sets us apart is the ‘bookend’ human interaction still required for proper set-up and customization as well as importing and validation to ensure data quality. Our clients rely on us to handle the details and expect accuracy every time.”
Mirador’s advice; centralize the process (and outsource to an expert if necessary) and provide better alts data management results for clients and your firm.
The UHNW Advisor Roundtable is produced by Mirador, Inc, convening internal subject matter experts to discuss issues, offer insights and recommend solutions to topics raised by our Family Office and UHNW Advisor clients that are important to the UHNW wealth management community. External experts are also often consulted. © 2023 Mirador, Inc. All Rights Reserved.