Clients See Technology Different Than Advisors

Now of course, the accuracy of reports is never something to take lightly, so we dove right into the research. After a couple of weeks of reviewing the vendors reports and reconciliation history and the subsequent comparison to custodial statements, also being delivered to the clients, we arrived at a determination.

The custodian in this case handled the "booking" of dividends and certain accruals in a specific manner - and the vendor's system did not have a custom configuration for accommodating this nuance to the reports. As some background - we validated the performance calculations were correct, asset classes matched and all transactions that had already occurred were in line on both systems. The issue was a current balance difference between the custodial statement (with the forecasted dividends included for the next month or quarter) and the vendor performance and holdings report without that future allocation included. The differences had been as high as $10,000 but on average were around $500.

The practice team was literally going out of their minds on this issue - feeling that they could in no way use the vendor reports to work with the client. However, the vendor reporting system produced a vastly more customer-friendly report that also included other accounts not at that custodian - a big value to this practice's customers.

In our discussions we went so far as to consult a third party considered expert in portfolio reporting and presented the scenario. They also felt this was an acceptable anomaly as the balance difference was based on potential future accruals that had not happened - in essence the vendor was not misleading the investor as it was accounting for the account and remaining portfolio as to what had been officially settled.

To no avail, the practice team was upset over the issue and having second thoughts about the vendor. We finally settled in a bit of an unorthodox manner. I suggested we schedule a brief meeting with their top two clients and present the situation and request their perspective. The practice team huddled and slept on the idea for a few days and came back ready to give it a try.

Both meetings were phone calls - where a summarized example, specific to each client was emailed to them in advance of the call. During the call we presented the issue, the analysis we had completed and what our determination was. Our request to the clients was feedback on how they felt about this issue having been receiving both reports.

As some background - both clients, one male and one female (unrelated), had been with this practice for more than three years- and both had an overall average portfolio balance north of $5 million under management.

Both clients had almost the same reaction. The male client had not even noticed the difference, but noted that he did review custodial and practice reports mailed to him. The female client had noticed the difference, and had taken the time at the first instance, to compare the statements and felt they were both generally accurate as to holdings and transactions. Neither was disturbed nor distrustful of the practice based on this. Both - and I am summarizing as it was worded differently per client - suggested that they had busy lives and had engaged this practice to handle their portfolio affairs. They felt our explanation of the issue was satisfactory.

We left them with the takeaway that they could also confirm with the custodian directly as to how they handled future accruals of values to their reports.

This practice came away a bit shocked - however - I reminded them that their personalities were configured for working "in the weeds" of these details. Clients are largely not favorable to dealing with those details and thus hire trustworthy advisors to manage this for them.

They determined that:

  1. They were going to build this scenario into each of their client meetings ongoing
  2. Make a calmer recommendation to the vendor for customization based on this situation
  3. Spend more time surveying clients on their view of the firm's technology offerings


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