Process Improvement | Case Study

Summary & Key Issues

Client was a broker dealer whose wealth management division offered the full complement of investment advisory/fee based products.  Our workflow analysis and process improvement exercise focused primarily on the operational aspects of their wealth management division.

1. Growing Pains: The wealth management division had experienced tremendous growth in both assets and the number of accounts over a two year period, prompting significant operational support concerns regarding resource allocation and scalability.  As a result, there was growing concern among senior management as to the quality & service delivery of their advisory products and the negative perception that was starting to surface throughout their financial advisor salesforce.
    
2. The People Factor: The current Director of Wealth Management, while an experienced Financial Service executive, was new to both the organization and the investment advisory division.  In addition, there was lack of ownership and definition of roles & responsibilities among the division's manager and staff.  
    
3. The Lack of Process: Although the division had been in existence for several years, there was no clarity around departmental policy & procedures, including corresponding documentation.  The overall business process and sub-processes (i.e. Account Administration, Trade Support, Reconciliation, Performance & Reporting) to support the advisory business was dysfunctional and inefficient, creating unnecessary stress on management & staff which resulted in a serious morale issue.
    
4. Making the most of Technology: There was a lack of understanding & knowledge among personnel regarding both the internal and external systems used to support the advisory business - the value that each system provided and the dependencies that existed. 

Resolution | Key Learnings

1. Account Administration

This group was responsible for performing two main responsibilities of Account Administration: New Account Onboarding & Account Maintenance. Our initial observation was that there was no clear understanding of workload allocation across the group and designated associates were assigned to specific wealth management programs without any regard for the volume and/or complexities of the particular product.  This created a very distorted and inefficient utilization of resources, which was validated by our attribution analysis of account volumes for each Wealth Management program. 

Further analysis of workload by Wealth Management program for each branch office/financial advisor suggested a more efficient process and use of resources would be to assign designated branch offices across the Account Administration associates.    This would more efficiently balance the workload, provide a measurable level of accountability for each associate and create depth of product knowledge among team members.  In addition, the assignment of branch groups provided a single point of contact (with backup) for branch personnel, greatly enhancing the ability to build strong relationships & provide a much better client experience.

Another key finding while observing the Account Admin team, but was prevalent throughout our workflow analysis, was the clear need for the operations team to create & maintain a Manual of Policies & Procedures governing the Wealth Management business.  A significant section of this manual should be dedicated to the Wealth Management program “how-to’s”, providing education to the financial advisors and branch support teams.  By providing this information to the branch personnel further upstream in the process, expectations would be properly managed, exception requests would be kept to a minimum and the account administrators role as product educators would be significantly reduced, allowing them to focus on efficiently processing the daily business.

2. Reconciliation

This group was responsible for the data maintained on the portfolio accounting system for all Wealth Management programs, keeping it in sync with the custodian books & records.  The two key elements to ensuring successful delivery of all Wealth Management products are: Data Integrity & Portfolio Reconciliation.

As this data drives portfolio manager decisions, the execution of trading strategies and client performance measurement & reporting, it is imperative that there is a standard, well-defined process on how each associate approaches their data integrity and reconciliation responsibilities.  Based on our observations the following are a few recommendations on how this team could improve upon the efficiency of the recon process:  a continual analysis of the daily interface between the custodian & the portfolio accounting system, ensuring all securities & transactions are properly coded and mapped, solidifying the delivery time of the daily reconciliation exception reports & making sure this task is staffed appropriately, separating the recon reports by Wealth Management program and position/cash, prioritizing the reconciliation of “trading versus non-trading” accounts and most importantly reconciling all accounts on a daily basis.

These steps will define responsibilities and provide a level of accountability for each associate, ensuring the successful completion of this sub-process & allowing the workflow to proceed along the business process.

3. Performance Measurement & Reporting 

This team was responsible for all portfolio performance measurement functions related to the accounts within the Wealth Management division of the organization.  Report production and distribution responsibilities are also incorporated within this functional group.  Data integrity and quality assurance are critical to ensuring that accurate portfolio appraisals are provided to both the financial advisors and investing public.

With that said, it appeared as though there was no formal process in place for monthly performance reviews.  The database should be analyzed to ensure the proper handling of new securities and corporate actions, pricing issues, holdings to performance market value comparisons and cash flow validation.  Portfolios should be scrutinized for performance outliers, grouped by Wealth Management programs, according to asset manager, financial advisor, investment objective and/or investment style.  The creation of performance composites would greatly enhance this review process.  In addition, performance for combined accounts and underlying benchmark data should be reviewed on a monthly basis.  Once this standard, well-defined monthly performance review process has been established, it can be repeated during quarter end.  This will allow associates to address issues much further upstream, leverage repeatable monthly & quarterly checklists and make the quarter end report production cycle much more timely and efficient.

A couple of other recommendations were provided to the firm which would allow the operations team to focus on providing a quality product/service to the financial advisors & investing public, as well as, addressing scalability concerns.  (1) Outsourcing the production and fulfillment of the quarterly performance appraisals provides the associates the opportunity to concentrate on quality assurance and removes the team from the production assembly line scenario, greatly improving the group’s morale.  (2) Another suggestion aimed at enhancing the financial advisor experience was the creation of PDF report files, collated by branch & financial advisor, for distribution via the firm’s intra-net site.  This is an extremely fast and efficient method to disseminate this critical information to the sales force.