Numerous factors have combined to sharpen the industry’s focus on client reporting, according to a new study which showed an air of frustration among family wealth firms when it comes to installing new technology.

Numerous factors have recently combined to sharpen the industry’s focus on client reporting issues, according to The Family Wealth Alliance's Inaugural Client Reporting Study, which revealed an air of frustration among family wealth firms when it comes to installing new technology.

A total of 76 firms including 45 multi-family offices, 18 firms offering external chief investment officer services and 13 single family offices took part.

Under half (40 per cent) - though still a sizable portion - of respondents said they were less than highly satisfied with their firm's client reporting capabilities, with MFOs conveying the greatest level of dissatisfaction and single-family offices the least.

Bob Leaper, head of business development at DST Global Solutions, recently wrote on the pages of Family Wealth Report that many wealth management firms are “rethinking their business models,” resulting in increased interest in client reporting tools that enhance transparency and client satisfaction.

In line with previous research by the Family Wealth Alliance, a further 40 per cent of participants pointed to client reporting improvements that they would like to make, but have been unable to. (In the firm’s November 2013 External CIO Study, for example, an overwhelming 83 per cent of firms serving as external CIOs for private families and family offices said reporting capabilities were “very important” to their clients. However, the majority of them weren’t satisfied with the quality of the reports they provide - see more here).

The types of services respondents to FWA's latest said they would like to offer include, among others: after-tax reporting and performance analysis; online, real-time performance and balance sheet reporting; partnership accounting for family investment entities; improved reporting of hedge funds and other illiquid assets; and improved aggregation to incorporate all client assets. As regards the latter, the firm noted that new investment products such as complex derivatives and sophisticated hedge fund strategies make it more difficult to value and report on assets at any particular time.

As was the case with the CIO study, typical barriers to upgrading – according to the latest survey – include: legacy technology systems that are costly to modernize; the complexity of some enhancements such as after-tax reporting; and delivering client reports on mobile electronic devices.

Meanwhile, developments on the supply side are also driving change; hedge fund administrators, for example, are starting to sell client reporting services in the family wealth space, while Silicon Valley startups begin tapping into the reporting sector. Mergers, FWA added, have also altered the landscape - notably those involving Black Diamond Performance Reporting and Tamarac, by Advent Software and Envestnet, respectively. However, despite the emergence of some strong competitors, reporting vendors are “not well known,” the firm said.

“Our study finds that making a choice among the shifting sands of vendor firms, myriad options, and disparate client demands is the challenge facing family wealth advisors today,” said Thomas Livergood, chief executive of FWA.

“On the demand side, the unbundling of wealth management services, particularly where ultra-wealthy clients are concerned, has increased the need to pull in data from disparate sources and present it in a consolidated fashion. In particular, the greater role now played by firms serving as external CIOs to families and family offices has heightened demand for improved aggregation and reporting,” the Wheaton, IL-based research and consulting firm said.

For example, external CIO firms were the most likely participants to say that reporting services are very important to their clients (94 per cent). Similarly, it was generally agreed among respondents that it is very important for external CIO firms to have information about all a client's holdings. MFOs were most likely to call such access very important (98 per cent), followed by external CIOs (82 per cent) and SFOs (69 per cent).

Overall, the most-offered high-end service was tax reporting – carried out by 85 per cent of SFOs, 64 per cent of MFOs and just 29 per cent of external CIOs. FWA said SFOs are much more likely to offer high-end reporting services - and to experience much higher levels of client usage of such services - than the other two groups.

As FWA said, there are costs and risks that come with technology upgrades. And while various providers claim to offer effective and cost-efficient solutions to address and comply with new standards and changing client expectations, other recent findings have suggested that providing “truly customized” reporting remains a challenge for many industry players.