Communicating Error-Free Investment Results

How automation can minimize operational, regulatory and reputational risks in investment management marketing

With input from Richard Kerr of K&L Gates LLP, and Amy Jones, CIPM, of Guardian Performance Solutions LLC


The investment management industry has automated almost every aspect of its operations over the last several decades: portfolio accounting, performance calculation, pre-trade compliance, order management and trading, analytics, CRM and, more recently, portfolio risk modeling.

But when it comes to pulling all this data together to tell a cohesive story to existing and prospective clients, most investment managers are still operating in a 20th century tech environment, relying on a hodgepodge of spreadsheets and manual calculations to create and publish marketing and client reporting materials.

We call this the “last mile” problem, and it’s a big one. In this paper, we take a hard look at the last mile problem: how it manifests itself in most asset management firms; the operational, regulatory and legal, and reputational risks it poses; and how managers can use technology to fully automate their marketing materials and client reports, and generate error-free communication of investment results.


Origins of Last Mile Problems

Most investment management firms automated their operations as relevant technology became available for various “silos” such as trading, accounting and performance measurement. But those technologies weren’t always fully integrated or able to “talk to one another.” In order to present holistic investment results to prospective clients, pulling data from these different systems is often done manually. At certain firms, data is downloaded into spreadsheets and then linked into presentations.

For those firms who claim GIPS compliance, most performance calculations have been fully automated for some time. But their processes for maintaining composites, preparing GIPS statistics and updating their Compliant Presentations (CPs) are still a combination of manual, semi-manual and automated steps.

Since the process isn’t perceived as “broken,” in many cases, it hasn’t been fixed.

To Err is Human
Anytime there are human touch points involved in calculating, combining or updating performance information, there is potential for error. A broken link or wrong cell reference in a formula is more likely to go undetected than a manual error due to the false sense of security quasi-automation provides. And then there’s the “recycling” problem. Once performance information is generated, the data is often used to feed multiple types of marketing materials and reports — each of which may have its own combination of automated, semi-automated and manual processes.

Without automated safeguards in place, it’s easy to see how non-compliance-approved or outdated information can slip into a marketing document or client report — and the hands of regulators.

Operational Risk
By failing to automate the last mile, asset managers are exposed to significant operational risk. Operational risk includes all errors that can occur in the normal course of doing business, be it setting up new accounts, trading securities, reconciling data, producing client reports or generating information for sales purposes.

Operational issues are of keen interest to regulators since sound operations form the foundation for accurate marketing communications and client reports. If the firm lacks robust controls, they invite regulatory scrutiny. And, by definition, a high level of operational risk opens the firm up to regulatory risk.

Regulatory and Legal Risk
In today’s aggressive regulatory climate, “that’s how everyone does it” is not enough to exonerate an investment manager who accidentally typed the wrong performance number into a marketing or client presentation as they headed out the door. At the very least, industry best practices are likely to be the “new normal,” and if better processes were available, it will be incumbent on the firm to explain why they were not employed.

Reputational Risk
Both operational risk and regulatory risk lead to reputational risk. Regulatory risk can be reduced by improving operations and addressing deficiencies cited by regulators. But a tarnished reputation is extremely difficult to recover from; asset management firms rely on their reputations to succeed.

Automating the Last Mile
Best practices are to automate the entire process, from the first step to the last — regardless of the size of the firm. Automation helps reduce human error, creates operational efficiencies and includes built-in safeguards that eliminate the possibility of distributing material that has not been approved by compliance. There are several options available to investment managers who want to automate the last mile, as well as important due diligence steps that should be taken when deciding which option is right for the organization.

Trust but Verify
Automation can increase efficiency while reducing operational, regulatory and reputational risks. However, putting blind faith in technology is never a good idea. Software is only as good as its inputs. There is never a substitute for prudent checks and balances. There still must be controls to confirm automation is working accurately.

Technology can help bring the last mile up to par with the automation used in the rest of organization. However, investment managers can never delegate their duties to software. Firms will always need qualified compliance personnel and other professionals with the expertise to oversee processes and stay ahead of changing regulatory requirements.


No matter how vigilant an investment management firm is, mistakes can still slip into marketing materials and clien reports, leaving the firm vulnerable to operational, regulatory and reputational risk. In order to communicate consistently accurate investment results — and avoid regulatory attention —investment managers would be well-advised to automate the last mile when producing marketing presentations and client reports.

Click below to read the full paper, including specific recommendations, checklists and action items.

For a list of due diligence questions we recommend COOs ask about their last-mile process, read this blog post.

Read Full Paper

To learn more about how Assette can help you automate the last mile, please click here.

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