The first point to acknowledge is that there many different hues and shades of client report. There is institutional client reporting at one end of the spectrum (very sophisticated and very technical) and at the other end the minimum disclosures that some private clients may label ‘client reports’, but others may simply refer to as ‘fund factsheets’. When considering whether or not to outsource, a major factor will be where along that spectrum your client reports reside.

The second point is that if you look back until fairly recently (and certainly for those firms at the institutional client reporting end of the aforementioned spectrum), ‘outsourcing’ meant complete delegation of the entire reporting process to their securities services partner.

The market has moved on from there and it is no longer a straight choice between handling reporting inhouse and turning to a securities services provider. In my view, there are now four main outsourcing options.

Full outsourcing

Outsourcing to a third-party administrator (TPA) is generally viewed as outside the ‘vendor space’. These partners already have the client’s data, and their asset management customers will have bought into their services for multiple years at a cost of many millions of pounds, perhaps contracting several different middle- or back-office functions.

It wasn’t so long ago that for asset managers looking to outsource their client reporting, this was the only option on the table.

A managed service

This is where the asset manager requires services rather than software, so they are not paying simply for a license and doing all the work themselves. The vendor supplies manpower to undertake some or all of the client reporting function every month. In addition to providing access to the required data and content, the client will almost certainly also retain a role in final report approval.

Some asset management businesses would not consider this to be outsourcing per se, but a surprising number are very flexible in their terminology and include this as a form of subcontracting.

Hybrid outsourcing

A hybrid variant is where some of the reports are produced inhouse and others are outsourced. We often encounter situations where the standardised reports are outsourced, and any custom reporting is retained inhouse. This happens because the standardised reports are not only easier to automate (from the client perspective as much as that of the service provider), but they will also generally represent the majority of the reporting output. As such it makes sense to outsource the standard content and allow the client’s inhouse resource to devote their time and attention to generating the custom reports. That said, the custom reports may eventually be outsourced too, but initially it makes the most sense to start with the standardised reports and deliver these as a ‘quick win’.

In addition, the bigger asset management firms will sometimes segment their clients by size and give their ‘platinum level’ reporting to the businesses mandating the largest AuM.

Buy off-the-shelf software and ‘self-serve’.

This is the vendor space, pure and simple. This area has grown enormously in sophistication over the last 20 years and has broadened the range of services on offer. Although not ‘outsourcing’ in its strictest sense, some asset managers consider any solution that is not highly bespoke and self-developed as ‘outsourced’.

If a major asset management firm was to call their outsource partner and tell them that it had just taken on a £100 million mandate from a pension fund, but the client reports have to ‘look like this’, they will likely receive shrugged shoulders as a response. Many outsourcers are just not geared up for quick turnaround delivery to help asset managers onboard a new investor.

A specialist vendor such as Factbook, on the other hand, is prepared for this kind of rapid delivery. They are already handling the asset management firm’s data and recognise that one of the asset manager’s major challenges is during the onboarding phase. Mandated reporting content, mandated reporting standards, and mandated reporting intervals are all meat and drink to vendors.

Conclusion

Asset managers tend to see vendors from a completely different perspective to custodians and third-party administrators. In reality, there is very little difference, but vendors are usually kept at arm’s length by asset management firms in comparison.

I would not recommend that an asset manager approach a third-party administrator for client reports because TPAs are not generally equipped to handle this kind of work. It’s not their core business – it’s another ‘me too’ service designed to make the client more ‘sticky’. They are not offering that service because they consider themselves to be a centre of excellence. This is borne out by the number of TPAs partnering with or even buying software vendors.

The decision to outsource client reports is perhaps less clear today than it has ever been due to the blurring of the lines between the options available. What is apparent, however, is that with more modern, capable technology and specialist skills, even smaller vendors can now compete with the large TPAs.

By Abbey Shasore, CEO, Factbook

@FactbookCompany

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