Wealth management firms face the challenge of satisfying various stakeholder groups while maintaining effective communication and efficiency. Technological innovations, such as CRM systems, have helped improve these aspects, but the area of overseeing portfolio propositions has often lagged. Whilst every set of processes is a control system of some form (it is really just the level of ‘control’, responsiveness, effort and risk that is the variable here), the introduction of dedicated portfolio control systems is a game-changer, reducing risks and human effort while enhancing client service and business governance.
If we look at many ‘traditional’ methods often the control system involves investment advisers promoting actions for clients based on new information available, which requires the formulation of a proposal which ideally fits within the firms policies in terms of asset allocation risk profiles and other measures. This then needs to be approved by the clients and when implemented is often then periodically checked by a firm’s compliance team, all which takes considerable time and effort, not to mention that should the compliance team find situations of concern then it could be too late. This is an example of a delayed feedback control system.
Dedicated portfolio control systems however help firms and advisers determine pre-compliant adjustments to documented client investment policies, provide oversight assessment, and offer tools for rapid remediation. They positively impact various stakeholder groups, including clients, advisers, management, directors, shareholders, regulators, and insurers, by bringing robust methods to assist advisers and reduce management time.
Stakeholder Group – Clients: Today’s consumers expect (and regulators insist) service providers to demonstrate they have the systems to deliver services according to agreed-upon terms. Dedicated portfolio control systems can showcase a wealth management firm’s professionalism and trustworthiness, assuring clients that their investments are in safe hands.
Stakeholder Group – Advisers: Advisers increasingly expect firms to provide tools that help them deliver higher quality service more efficiently. Portfolio control systems alert advisers to areas where there may be client concerns and offer pro-active solutions, becoming a differentiating factor in attracting and recruiting top talent.
Stakeholder Group – Management: Portfolio control systems allow for improved information flow, risk reduction, and the identification of new opportunities. The competitive nature of the industry will reward firms that can minimize overheads and improve client service, adviser productivity, and risk management.
Stakeholder Group – Directors: Boards of wealth management firms must prioritize ensuring clients receive services according to promises made, particularly in light of increasing regulatory scrutiny. Portfolio control systems offer accessible, visible, and continuous oversight for directors.
Stakeholder Group – Shareholders: Firms with demonstrable control systems are better positioned for raising capital or entering corporate arrangements. It is well recognised that wealth management firms using spreadsheets to manage client funds are worth a fraction of those implementing advanced control systems.
Stakeholder Group – Regulators: Regulators increasingly expect wealth management firms to align their practices with investment product regulations. Portfolio control systems can help firms minimize effort in meeting regulatory requirements and demonstrate best practices.
Stakeholder Group – Insurers: As insurers focus on differentiating firms with best practice control systems, those with comprehensive portfolio control systems may enjoy reduced business risk and insurance premiums.
Conclusion
Portfolio control systems go beyond managing client portfolios; they unite client service and compliance, reduce management overhead, and help boards meet regulatory requirements. Implementing these systems can provide increased confidence and momentum for shareholders and external parties, ensuring successful client portfolio delivery.
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