What Investors Want Most in Investment Reporting

David Thompson
Benjamin Gross

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

Trust is core to the relationship that financial professionals build with their clients, but certain issues that impact that relationship are out of the advisor's control. Performance reporting is clearly under your control, and our research shows what advisors need to do to respond to their clients’ concerns.

For example, the advisor-client relationship is governed by "principal-agent" dynamics, where the agent is acting on the principal’s behalf. Specifically, the advisor (agent) has a deep set of skills and expertise and implements financial decisions on behalf of the client (principal). Even though investors don't have high levels of sophistication when it comes to financial planning and investment management, they still need to determine whether their advisor is doing a good job. That's why investment reporting and financial-goal progress takes on such a central role within the relationship. It's one of the few ways that investors can monitor performance around a topic that is not their core area of expertise, and ensure that their agent is acting on their behalf.

The two highest priorities to investors when it comes to investment performance reporting are that fees are fully disclosed and reports are simple and easy to understand. That was a key finding in our research, as shown below:

Those were two of 15 different attributes from which investors could choose. To put things into perspective, the next five highest priorities combined were less than the individual weight that investors placed on these priorities.

For a financial advisor to leverage investment performance reporting as a cornerstone to improving trust and strengthening the relationship, then prominently disclosing fees and making sure information is presented in a way that is simple and easy to understand are clear first steps.