Firms require technology that lets them ‘document the entire advisory process,’ says report
Since its full launch in July, CRM2 has generally made things better for investors, as more are starting to understand what they pay for, how much they pay, and how much they have. And on the other side of the table, the shift is creating a need for advisors to invest more in their digital capabilities.
According to a new report from wealthbriefing.com, Canadian wealth firms are being forced to adopt new technologies as a result of CRM2 compliance requirements.
One significant factor is the requirement to report investment performance on a money-weighted return (MWR) rather than a time-weighted return (TWR) basis. Since MWR includes effects of deposits and withdrawals, critics say it makes evaluating investment managers’ performance against a benchmark difficult. For that reason, many firms have decided to present both TWR and MWR metrics.
Because of the increased level of information provided in client reports, there’s a greater need for immaculate documentation and data integrity, enhanced investor education and engagement, and customisability in performance reporting.
“For institutions to ensure they stay in line with CRM2, they must provide investors with comprehensive account information through various channels: statements and confirmations, mandatory biannual reports and conversations with relationship managers,” Andrea Buzzi, head of solutions at Appway, said.
“More broadly, they also need to document the entire advisory process,” he said. “This means that firms should equip themselves with digital tools that automate tracking and auditing processes, and offer enhanced reporting and profiling features with intelligent business rules by design.”
According to the report, firms can differentiate themselves by not just complying with CRM2, but by demonstrating added value through technology. That includes scaling up processes through automation — which is more of a challenge for smaller, less consolidated players since they also have to prioritize cost containment.
“The wealth market is dominated by big banks that are busily upgrading legacy systems and investing in capabilities and partnerships deemed critical to their strategies,” said Joy Savage, a partner at Deloitte Canada. “In contrast, established independent players are resource-constrained and generally less able to upgrade, while new independent players are emerging but less frequently due to a smaller ‘size of prize’ being on offer.”
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According to a new report from wealthbriefing.com, Canadian wealth firms are being forced to adopt new technologies as a result of CRM2 compliance requirements.
One significant factor is the requirement to report investment performance on a money-weighted return (MWR) rather than a time-weighted return (TWR) basis. Since MWR includes effects of deposits and withdrawals, critics say it makes evaluating investment managers’ performance against a benchmark difficult. For that reason, many firms have decided to present both TWR and MWR metrics.
Because of the increased level of information provided in client reports, there’s a greater need for immaculate documentation and data integrity, enhanced investor education and engagement, and customisability in performance reporting.
“For institutions to ensure they stay in line with CRM2, they must provide investors with comprehensive account information through various channels: statements and confirmations, mandatory biannual reports and conversations with relationship managers,” Andrea Buzzi, head of solutions at Appway, said.
“More broadly, they also need to document the entire advisory process,” he said. “This means that firms should equip themselves with digital tools that automate tracking and auditing processes, and offer enhanced reporting and profiling features with intelligent business rules by design.”
According to the report, firms can differentiate themselves by not just complying with CRM2, but by demonstrating added value through technology. That includes scaling up processes through automation — which is more of a challenge for smaller, less consolidated players since they also have to prioritize cost containment.
“The wealth market is dominated by big banks that are busily upgrading legacy systems and investing in capabilities and partnerships deemed critical to their strategies,” said Joy Savage, a partner at Deloitte Canada. “In contrast, established independent players are resource-constrained and generally less able to upgrade, while new independent players are emerging but less frequently due to a smaller ‘size of prize’ being on offer.”
Related stories:
Financial firms still lack effective fintech strategy
Is the surge of fintech running out of steam?
