Ensuring data integrity is crucial; even minor errors can lead to significant misrepresentations. We see recurring issues arise in reporting assets under management (AUM) and Accounts. Two common missteps we uncover with clients when we do our initial data reviews in this area are confusion about what should be reported at the strategy and composite levels and reporting by client type.
Composite AUM vs. Strategy AUM
A standard error that occurs is a misinterpretation in the reporting of composite AUM as equivalent to strategy AUM. While composite AUM aggregates the assets of accounts included in a specific performance composite, strategy AUM encompasses all assets managed under the strategy, regardless of their inclusion in a composite. While it is common knowledge, managers incorrectly provide total strategy assets alongside performance.
Databases can lend themselves to confusion in how the database structure collects the data. Where a database asks for performance and aum together on the same page, we find managers’ reporting performance and the corresponding assets for the strategy itself instead of the composite. Assets should reflect the composite (or vehicle) that the performance represents.
Client Types
Each database collects the client types in various formats, and categorization can vary widely. Understanding the distinction of what those categorizations mean is critical to accurate reporting. Some areas of confusion include:
Wrap Accounts: Incorrectly reporting Wrap account participants independently versus as a single Wrap account. ( i.e., 125 participants should be counted as 1 Wrap account, not 125 separate accounts )
High Net Worth Individuals versus 401k/IRA’s
Institutional vs. Retail
Individual vs. Trusts
Corporate vs. Public Pensions
Number of Accounts
The number of accounts underpinning the AUM figures is another aspect that is prone to misreporting for the same underlying reasons. Databases often request the number of accounts contributing to the reported AUM. Yet, managers report the total number of accounts at the strategy level instead of the composite level, impacting accurate client-type reporting totals.
We’ve touched on the reasons for errors in reporting in previous articles, and the most common factors that contribute to any issues in reporting lend themselves to:
Unfamiliarity with the varying consultant database structures and the evolving landscape of changes.
A lack of understanding of the definitions of the requirements. Each database asks for the same thing in varying ways.
Individuals reporting the data have limited knowledge and experience with what the data represents.
Our role as an outsourced provider is to report the most comprehensive and accurate data consistently across all databases. Additionally, particularly to new clients, we do two critical things:
Provide them with guidance in accurately defining how a manager categorizes and collects data so it is clean and meaningful. If necessary, assist them with reclassifying data across all areas while streamlining their internal functions to create a consistent, repeatable process for accurate data collection and reporting.
We review all the databases for new clients to ensure the reporting is accurate on a historical basis and update datasets that are incorrectly reported so things make sense. Critical to this work is helping managers develop clear internal guidelines for data collection and reporting to prevent errors.
Partner with Experts
Reporting errors often stem from oversight or misunderstanding, especially when transitioning from another service provider. For this reason, we go beyond conducting a thorough data audit when engaging with new clients. We work closely with clients to discuss the nuances of reporting requirements, clarify potential consequences of errors, and help refine their processes to ensure concise, accurate reporting.
By addressing the root causes of reporting errors and supporting the implementation of best practices, IMSS can help asset managers ensure their data accurately reflects the accurate scale and scope of their strategies.
If you’re interested in evaluating your data and reporting processes, we’d welcome the opportunity to discuss how we can help. Using our Data-Centrix technology, we assist firms in automating data flow to leading consultant databases globally, ensuring precision and efficiency. Let’s start a conversation about optimizing your data management and reporting.
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