In its series interviewing firms about client reporting, this news service speaks to wealth sector fintech firm JHC.

In the latest feature in a series about client reporting, this publication recently quizzed JHC, a financial technology firm working in areas such as wealth management, about its views. In particular, the business comments on how regulations such as the European Union’s MiFID II regime, which came into effect last year, are affecting business. JHC also reflected on developments such as artificial intelligence and new communication channels. Andrew Watson, who is head of Figaro product strategy at JHC, spoke to this publication. (To see a recent research paper by the publisher of this news service about client reporting, see here.)

What do you see as the main ways in which firms can often fail to get client reporting right? 
Regulation dictates that client reporting must be distributed via a durable medium – in other words, a format that can’t be adjusted once the report has been produced. MiFID II now requires these reports to be sent quarterly rather than every six months. Therefore, firms need to be distributing reports electronically in order to avoid doubling their printing and distribution costs, which are inevitably passed on to the end client.

A common misconception among wealth managers is that their client base is slow to adapt to technology - however, this simply isn’t true. Even among the more traditional wealth management demographic, real-time access to client portfolio analysis and information is becoming the expectation rather than the exception.

It’s crucial that wealth managers engage with their clients via a digital wealth platform that can be accessed at both ends, providing a secure method of two-way communication from which digital reports can be shared.

Chatbots and other AI-powered tools are coming out from a number of banks – do you think these routes help client/firm interaction?
Whilst AI tools such as robo-advice present a cost-effective option that works for a wide variety of investors, it isn’t suitable in a lot of cases, especially when dealing with larger, more complex portfolios.

Where we are seeing AI really add value is via processes such as portfolio monitoring, as opposed to making key investment decisions; for example, by monitoring a portfolio against set risk, performance and benchmarking parameters, automatic notification of when these are breached and adjusting the portfolio investment strategy accordingly. 

Regulation has played some part in how client reporting happens – what do you see as the biggest impact? 
MiFID II continues to present a challenge for wealth managers as, from January this year, they need to provide a personalised disclosure to the end investor, including the costs and charges applied within investment products.

For the first time investors will see charges expressed as a percentage of their portfolio and may increasingly look for wealth managers to justify high costs and charges during times of lower performance.

Savvy wealth managers can use this as an opportunity to engage with their clients and explain the value of the investment portfolios they offer. Having the right technology will be key to helping them give their clients a transparent and personalised view of their costs and charges, as required under the regulation.

How do you think client reporting by wealth managers is going to look in the future?
It’s been reported that we are sitting on the cusp of a $30 trillion wealth transfer from Baby Boomers to Millennials and Generation X.

As a demographic, they embrace disruptive tech with an increasing appetite for the instant. Over the next five years it is essential that wealth managers leverage technology in order to engage with this digitally-savvy wealth generation - but not at the expense of the human touch.

Used effectively, technology is vital to streamlining investment processes and providing the client with real-time access to information regarding their portfolio. However, we also know that clients place huge importance on the personal relationship with their wealth manager, especially when we are talking about larger, more complex portfolios. 

Ultimately, wealth managers that adopt a hybrid of technology and the human touch will reap the rewards; to this up and coming generation, the user experience is as valuable as the returns on the money they are investing.