It seems that every RIA reported record growth in both 2020 and 2021, and accordingly, every RIA is looking to add members to their team to help support the additional clients. Many firms are seeking service advisors to handle client relationships, as well as client service associates who can help with paperwork processing and day-to-day administration of client accounts. Lately we’ve been speaking with more firms about the position of performance reporting analyst. Regardless of which performance reporting tool your firm is utilizing, you need someone dedicated to safeguarding the integrity of your data in the system, the customization of reports and portal views, the classification of assets and the householding of accounts.
What many RIAs don’t understand is that when you partner with a performance reporting provider, you are in essence buying that software package as “software as a service” or SaaS, which means they are putting the tools in your hands and allowing you to use the software however you see fit. Someone from your firm needs to design and maintain everything inside the performance reporting database, which can easily be a full-time job. The householding of accounts can be extremely complicated, depending on the complexity of your clients. For example, you need to identify the seven accounts that make up the Smith household and make sure all seven accounts are tagged and lumped together from a performance reporting perspective, and that all seven are active in the client portal, should the client log in and want to review their assets you are managing for them.
Each position inside the database needs to be classified. Your firm needs to determine how you want to label Apple stock, for example. The reporting software allows you to classify assets however you want—you can label Apple as “Equity” or “Large Cap” or “Technology” or “Growth,” etc. You need to classify every security in a way that matches your firm’s investment perspective—the performance reporting vendor cannot do that for you, as every one of their RIA clients categorizes securities in different ways.
You need to design the layout of your quarterly performance report and determine how you will be distributing those reports every three months—are you emailing them through a secure link? Are you simply posting them to the client portal and notifying clients when the reports are ready? You also need to design the layout of the client portal and determine what a client can and cannot see when they log in. You need to keep track of outside assets, and help clients reestablish their links to outside accounts if/when those links break. You also need to manage client access and passwords for the portal—that alone can feel like a full-time job for someone!
Keeping tabs on performance numbers can feel like a full-time job as well. Every quarter, as positions, transactions and values flow from the custodian into the performance reporting software, it seems that little gremlins sneak in and wreak havoc. And the problems pop up for different clients and different accounts each quarter, preventing you from simply flagging five or six accounts that repeatedly have problems—it’s always something different, in a different account. One quarter, a muni bond position may be duped in a certain account, inflating the value of the account and therefore its performance. In another quarter, a different account may have a journal or withdrawal get duped, which erroneously reduces the account value, which makes performance too low in the account. Someone needs to search for these little gremlins and fix these various problems every quarter.
For those RIA owners that say to us, “I just don’t think this is a full-time role,” we remind them that we’re now living in a 24/7 world where clients want to log in to their client portal at any time, on any day, to see their performance and their asset allocation. This means you can’t simply rely on the quarterly performance reporting cycle to go through and QC these reports four times per year—someone at your firm needs to be always on top of the data integrity, ensuring the numbers inside the performance reporting tool are correct. And not only does the Performance Reporting Analyst need to keep tabs on all your existing clients, but they will also be in charge of setting up all new relationships inside the software as you bring on new clients—something that, as we said out the outset of this article, is happening at a record pace right now. Because billing is most often processed inside the performance reporting software, the Performance Reporting Analyst can also process billing every month or every quarter.
RIA owners typically balk at adding head count to non-client-facing roles within their organizations, but as discussed, the integrity of your firm’s data is presented to clients on a daily basis. In that sense, the performance reporting analyst could be the most valuable role at your firm. We urge RIAs to consider the addition of this role to their rapidly expanding firm.
Matt Sonnen is founder and CEO of PFI Advisors, as well as the creator of the digital consulting platform The COO Society, which educates RIA owners and operations professionals on how to build more impactful and profitable enterprises. He is also the host of the popular COO Roundtable podcast. Follow him on Twitter at @mattsonnen_pfi