Poor organizational transparency is bound to undermine governance initiatives, fuel compliance challenges, and hinder collaboration between teams and departments.
Every asset manager understands the need for transparency, though many struggle to provide a level of transparency that satisfies the needs of investors. What is it that makes providing transparency so challenging? More importantly, how can you reduce organizational opacity and promote trust throughout your firm?
The challenge at hand is a complex one, as many factors can contribute to a lack of transparency. Fortunately, the solution is much simpler. Investing in the right technologies and digital tools offers a clear path forward that will enable your firm to provide a level of transparency that keeps everyone happy, especially your clients.
What Causes Poor Corporate Transparency?
Several factors can lead to poor transparency, including the following:
Inconsistent Reporting Practices
It seems as though every private equity (PE) firm has devised its own way of reporting its values, assets, returns, and fees. While your firm’s reporting strategies might make sense to your team, your clients may find them confusing and difficult to process.
With that in mind, and in the spirit of transparency, consider reaching out to your investors to gather their feedback on the reports you provide. Determine whether they generally found them helpful or frustrating to read.
Once you have taken the time to reassess the way you report portfolio performance, consider adjusting your practices to reduce friction between your firm and its clients. Even a few seemingly small changes to the format or style of your reports will serve to help you more effectively share information with your investors.
An Inability to Deliver Information in a Timely Fashion
Delivering information to your investors is only half the battle. Even the most detailed performance reports are useless if they are not delivered in a timely manner. Investment firms that use outdated data management practices often struggle to generate reports efficiently. As a result, their clients are typically provided with reports containing information that is weeks or even months old.
Ineffective Collaboration Between Teams
Unfortunately, collaboration is a major issue for far too many asset management firms. The answer can vary as to why that is, but most of the time, it is due to the fact that legal, accounting, and tax teams use disparate software solutions. Before PE firms can bolster external transparency, they must first eliminate barriers between their internal teams.
How Asset Managers Can Enhance Transparency
Providing investors with the level of transparency they desire requires a multifaceted approach. If your firm wants to be more transparent with clients in order to build trust, it must accomplish the following:
Establish Consistent Reporting Protocols
The first step you must take toward increasing transparency involves establishing consistent reporting protocols. While you probably already have such protocols in place, you should review them to ensure that they are clear and easy to understand. Doing so will ensure that everyone is on the same page when it comes to reporting fees, expenses, returns, and other data.
When reworking your reporting protocols, make sure that your chosen reporting methods don’t leave clients with more questions than answers. In other words, you need to explain all of your fees up front and include these costs in every report. Your investors should be able to easily review a performance report, interpret the information provided within, and understand exactly what is going on with their assets.
Be Honest About the Company’s Performance
Sharing positive news about a company’s performance is easy, but you need to consider what happens when a PE fund has to report losses. While it may be tempting to delay reporting such losses or to spare clients the details, doing so can actually diminish trust in a firm.
Therefore, PE firms should be forthcoming about their performance. An easy way to do this is to publish quarterly performance reports, good or bad. In addition, asset managers should be transparent about what deals are currently in the pipeline. Being so will demonstrate to investors that their assets are being put to good use.
PE managers should also set clear goals and share them with clients. Doing so communicates the asset manager’s expectations and helps clients better understand what sort of return they can expect from their investments. It also demonstrates the firm’s passion for delivering real value for clients. With that said, it is important not to set overly ambitious goals, as they can lead to disappointment and decrease trust in a firm if they are not met.
Eliminate Data Silos with Modern Business Software
Modern business software is a powerful tool for promoting business transparency. A top-end solution will unify your accounting, tax, and legal teams by providing them with integrated tools, and the teams can use these tools to share information, collaborate more effectively, and prepare performance reports in a timely manner.
The best business software solutions will include robust reporting tools that your firm can use to share data with clients. Such a solution will also allow your team to automate document generation, which will further improve organizational efficiency and expedite the delivery of information to investors. Streamlining the delivery of information ensures that clients receive performance data while it is still relevant and useful.
Want to Create Transparency for Your Clients? Athennian Can Help
Athennian’s business software provides the tools and features your business needs to promote organizational transparency. You can keep investors in the loop and provide them with timely, relevant feedback of their assets. In turn, this will promote enhanced trust in your firm and help you establish your organization as a reliable partner in the asset management space.
Athennian's modern subsidiary governance and business entity management platform that empowers teams to modernize transactions and compliance processes. It also includes advanced reporting capabilities, document automation tools, and everything your business needs to enhance transparency.
If you are ready to learn more about the power of Athennian, we invite you to book a demo.
Download the Athennian for Asset Managers Guide