Operations directors at hedge fund and asset management firms are frustrated when their back-office team commits performance and reconciliation reporting errors.
Reporting mistakes affect the portfolio analysis, and the actions taken as a result of that analysis will cause more issues.
Reporting Errors: How Will Everyone React?
- How will advisors explain to their clients why the cash and positions discrepancies are unaccounted for?
- What will the advisors say when the performance reports are inaccurate?
- Will the clients lose trust in the firm’s ability to deliver?
- Will the client look to select another advisory to manage their wealth?
After getting an earful from the advisors and senior management, it will be tempting to pass on the anger in kind to the reporting analysts they manage.
A good operations manager never plays the blame game, nor should they pass on their anger down the chain of command. They know that taking credit for all back-office success and failure goes with the territory of being in charge.
How to Fix Back-Office Reconciliation Reporting Errors
Set and Reinforce Standards
Remind the team of you and your firm’s expectations. Let them know clearly the type of work that is acceptable and unacceptable.
Employees will not verbally state this, but they want to know (and test) what the boundaries are in the workplace. They want to know what level of quality of work will earn them praise from their superiors and what is the bare minimum (i.e. what can they “get away with”) they must do before being addressed.
If your firm’s mission statement is to be world-class, let your team know that being world-class is not just an empty phrase. It’s a philosophy your firm lives by, and you can create employee performance standards, ensuring everyone lives up to the ideal.
Be Approachable; Welcome Questions
After setting the standard, encourage the team to ask questions and be open about the challenges they face with their work.
Reporting analysts look to you for guidance. They may not know every aspect of the portfolio accounting software, but if you calmly and patiently explain how to perform a function or how to fix an issue, they will learn better. Make sure they’ve taken notes on the matter, too.
But if you respond to questions in a frustrated and hostile manner, now you’re the one making a situation worse. You don’t know how much courage it took them to admit to you their struggles, and now you’ve humiliated the employee for not knowing what to do. Now the employee is scared to ask you anything, and they will do their work in fear, hoping whatever solution they have is correct. Chances are, their fear-driven work will yield plenty of mistakes, fueling the fire of your anger.
In short, be the positive and approachable manager you are or strive to be.
If these are recurring mistakes or otherwise, check your process documentation to see if there is anything missing in the steps.
Should you find something was missing that could have prevented errors, good job! You’re taking initiative s a manager by identifying a solution to a problem. Also, make sure your team looks at the updated documentation.
If you see the documentation is just fine but the employee is making mistakes because they aren’t reviewing the procedures, then make sure they have the process documents in front of them as they do the work.
Review QC Systems
If the issue does not reside in the documentation itself, check your quality control systems, both automated and manual.
Test if the automated QC checks are quickly able to spot missing prices or undefined securities, as an example. If your system isn’t spotting the missing data, you may have found the issue.
Not all errors are detected in automated checks, so if the issues persist, have a manual checklist. For instance, if there are cash and position breaks, the checklist can remind the employee to check the post dates, transaction types, to look for duplicates or deleted transactions, etc.
When your team knows all the places to check, they might find the problem faster.
Consider New Portfolio Accounting Software
Is your portfolio accounting software hard to use? Are you using an older, outdated version of the application?
Then you might want a new software or upgrade to the latest version.
Do your homework first, considering switching costs, time to transition and training on the new software.
If your team continually makes errors or the software is too difficult to use, consider back-office outsourcing specialists.
The outsourcing providers can handle recon and performance reporting, cost basis, billing, or other functions vital to your firm’s operations.
They also can offer customized services, so you can retain some functions in-house while outsourcing the rest.
RIA Operational Best Practices in Eliminating Reporting Errors
Mistakes are reason for disappointment, but operations managers should first ask themselves what they can do to improve the situation before simply hading off the anger baton to their back-office team.
By following best practices and setting a firm example from the top-down, you’ll help reduce reconciliation reporting errors and keep your team accountable.
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