CapWealth founder, chairman and CEO Tim Pagliara spoke to The Wall Street Journal about his firm’s performance reporting system on June 27, 2016. Not only does reliable, transparent data improve client trust, it also improves the efficiency of a firm and makes advisors better investment managers. Read the article here or the full text below.
Voices: Better Serve Clients with Clear Data on Returns
Advisers can better serve clients by investing in a flexible and transparent reporting method
A number of years ago, I served on the board of an endowment fund. Each time we met with the fund managers, I couldn’t get a straight answer on their fund’s performance and fees. I promised myself then that if I ever started my own firm, I would create a reporting system so transparent and straightforward that even a 12-year-old could understand it.
Trying to build wealth without data is like trying to build a house without a hammer or measuring tape. All too often, however, that is the case for individuals whose financial situation comprises multiple portfolios, real estate holdings and other assets. Investors’ overall lack of insight on their finances leaves them unable to make informed decisions about their family’s wealth and legacy.
You can better serve these individuals by investing in a flexible and transparent reporting method that discloses inflows, outflows, returns and expenses for the accounts you manage.
The ability to give people the information they need in specially tailored reports improves the client experience and makes your job easier. At my firm, we have been able to build a profound sense of trust with our clients (who can span multiple generations of the same family) based on our openness with data. This translates to improved client loyalty and retention, and acts as a differentiator when securing new clients. We were recently contacted by a family office who asked us to show them our month-by-month returns for the past five years. When we handed over the data, the family office said it was surprised since conversations with other advisers typically ended after such a request.
Clear data can also improve the efficiency of your practice by streamlining client communications. When markets are volatile, you’re prone to hear from anxious clients. You can quickly alleviate their concerns by giving ready answers to questions on performance, and by showing how those figures fit with the goals and risk profile you have already established with them.
Transparent reporting forces us to be better investment managers. When you understand exactly how and why you were successful or unsuccessful in the management of an account over a given period, you can learn how to leverage future opportunities and avoid making the same mistake twice.
Installing a comprehensive reporting system can be expensive, and there’s seemingly never a convenient time to make such a shift. But I would argue it’s an investment that will only prove more valuable in coming years.
The market for our profession is becoming more competitive as technology increases expectations for productivity and puts more pressure on costs. Combine that with the potential business impact of the Labor Department’s fiduciary rule, and the task of providing clear data to clients has never been more urgent. Sooner or later advisers must quantify their claims with a sharp pencil. Do so now, and you will improve the outlook for both yourself and your clients.