Fiduciaries

Why technology is the future for trust investment monitoring

Future of trust reporting

Technology is vital for trustees looking to thrive in the modern world. Automating data management processes and autonomous investment monitoring doesn’t just help to save resources, it also gives trustees the opportunity to focus on delivering a better overall client experience, to enable business growth.

Trustees already use a variety of software to help them, including trust administration software, accounting systems, amongst others. But when it comes to data management and investment monitoring, many still rely on reports from investment consultants and the associated manual data consolidation and client reporting processes. Here are some of the key reasons trustees are turning to technology to help them with investment monitoring.

Portfolio data consolidation and automated bookkeeping

Trust portfolio data sourced from a number of investment managers, spreadsheets, statements and systems inevitably has dozens of file formats and variations in the content. Dealing with these manually can be a huge time sink. However, technology is now able to automatically transform this disparate information into a single standardised schema, which can be processed systematically for downstream monitoring and reporting.

Eliminating the manual process of consolidating and reconciling data enables trustees to streamline their internal data management and investment monitoring workflows, reducing operational risk, improving bookkeeping integrity and freeing up time for higher-value interactions with clients.

If these data inefficiencies are not solved, it has a direct impact on margins and recoverability – and mean that dependent processes cannot be scaled. A reliance on mundane, repetitive tasks may also fuel staff turnover and key person risk, damaging morale and heightening the danger that knowledge of mission-critical manual processes will be lost.

Trust investment portfolios increasingly include alternative investments such as private equity, real estate and direct investments. The latest technology includes functionality that enables trustees to seamlessly update transaction and valuation data for any private assets, in dashboards that automatically consolidate this data with any publicly listed assets.

Taking command of investment monitoring

Another key driver of trustees turning to technology is the need to have ready access to up-to-date portfolio performance data for effective investment monitoring. Most trustees receive quarterly reports on performance from their investment managers, but with volatile markets and an uncertain economic outlook, there is now an expectation from clients that trustees will review performance and exposures more frequently and take swift, decisive action if needed.

Once trustees have drafted investment policy statements (IPS) with investment managers, client tolerance to risk has been assessed and target asset allocations created, trustees are in the best position to highlight any IPS breaches or style drift to their investment managers. Trustees that receive portfolio data daily can feed third-party alerts system that enable them to quickly flag any breached limits to their investment managers.

Timely data also enables them to more closely scrutinise performance, allowing trustees to quickly compare the returns of the trust portfolio against any pre-agreed relative or absolute benchmarks. Slow access to information makes it difficult for firms to track positions and transactions, monitor information in the event the level of exposure to a country or asset type needs to be known quickly. Such an agile view of the portfolio can also enable trustees to better manage cash and liquidity in line with client preferences.

Recently, there has been much greater scrutiny on the fees trustees are charged by their investment managers. A system that is updated automatically on a daily basis gives trustees much greater visibility of outgoing fees, so they can make more informed and timely decisions about manager selection against their performance.

Offering a scalable and personalised reporting experience

In an age where data volumes in the financial industry are mushrooming, clients don’t want to be buried by information. Instead, they are looking for actionable insights – useful, personalised analysis that makes sense of the data overload and presents easy-to-understand conclusions that can be applied in the real world. Whether that be in the form of a clear and digestible quarterly investment performance report or a thought-provoking balance sheet.

Timeliness matters too. We operate in a fast paced, increasingly real-time world, where outmoded data equals heightened risk and missed opportunities. Clients, especially the younger generations, expect the information they receive to be up to date. Tolerance for reporting delays and data inaccuracies is eroding fast. Technology can be the difference between having reports ready in near real time or waiting weeks after end of quarter for reports from consultants.

How can trustees implement new technology?

Trustees need a structured plan to implement technology. They should start by identifying their key challenges. Do they want to improve data management or gain near-real-time data portfolio data or automate reporting, or all three? After assessing and identifying their needs, they should assess their options for a viable software solution.

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