Using Excel spreadsheets is a common way to calculate numbers and manage data, but it is by no means a perfect solution for investment managers.
Excel... nearly every business has used it before.
Whether it’s for accounting, managing client and prospect information, or building reports, Excel spreadsheets have served as a go-to, default application for a long time.
But times are changing.
With increased demands placed on wealth and asset managers, firms can no longer afford the slow and manual processes, as well as the clunky and complex functionality that comes with Excel.
And with new investment management platforms and technology available, businesses no longer must “settle” for spreadsheets.
Even if you choose to stick with Excel, at a minimum you know the risks and potential pitfalls.
In a digital-first, data-driven world, wealth and asset managers need to provide accurate and timely information for both clients and colleagues, both of whom demand that expediency.
But if you’re using Excel spreadsheets to track reconciliation, performance, and other operations- and accounting-related functions, you’ll always be behind.
Firms can try their best to update Excel spreadsheets in a timely manner, but they’ll never be instant updates.
When dealing with Excel spreadsheets to update manually, mistakes will occur.
Whether you feel tired or think you’re fully focused, there is always a chance for typos.
In fact, 88% of spreadsheets contain mistakes!
All it takes is one incorrect deletion, entry, or formatting in a cell to mess everything up. Bad Excel data can result in unreconciled portfolios, inaccurate performance, incorrect billing calculations, wrong total market value, etc.
Barclays learned the hard way in 2008, when a spreadsheet error led to a large purchase of unwanted Lehman Brothers assets.
Maybe you can Control-Z your way out of the problem to revert to the spreadsheet’s original state, but not always.
Excel does not handle large volumes of data or complex calculations very well, making it more difficult to manage portfolios with so many assets.
As investment firms grow and handle more clients, assets, and data, spreadsheets can become unwieldy and difficult to manage. The manual input and maintenance required for each spreadsheet can lead to errors, data inconsistencies, and version control problems.
Dealing with investment data spread across multiple spreadsheets is a complicated process.
Sometimes you need to jump back and forth between tabs, running VLOOKUPs, macros, and other formulas, as you find, calculate, and compare the data.
And it happens all too often: you put in all this work learning to set up a formula, only to get a #VALUE! error.
Then you’ll be spinning your wheels trying to figure out the issue, but still end up where you started.
While technically there in Excel, the audit trail functionality isn’t the most user-friendly.
The burden is on you to set up the formulas. Without setting up the audit trail, team members make changes to the sheets with no way to track who made what change in a cell and when.
This makes it especially difficult to locate root causes of data issues in Excel, which could be a lengthy process depending on volume of data.
Of course, if there are more user-friendly audit trail solutions, investment firms will have an easier time with the portfolio data and reports.
It all ties back to the broader point: you and your team have to be the experts on Excel.
But learning complex formulas is not the easiest nor the best use of time.
You can go online to find a video or website that shows instructions, but sometimes those resources do not fully address your situation.
Other times those instructions are based on older versions of Excel, in which the layout of the Excel window tabs, icons, and buttons are not part of the new versions you’re using.
If it’s one person who is responsible for managing the spreadsheets, what happens when they’re out sick with little notice time or if they resign?
Will there be adequate backups in their place to handle the complexity of the Excel spreadsheets?
Regardless, there is always inherent personnel risk when it comes to manual tasks.
Given how easy it is to access the files and make changes (mistakes) in Excel spreadsheets without audit trails set up, then this process exposes very serious security risks.
Depending on where the sheets are stored, your IT team may need to password protect the folder and documents.
Without proper security, investment managers could face consequences from the SEC.
If you work with very large sets of data, you might notice how long it takes to load.
In those cases, Excel might even crash before you’ve had a chance to see the open spreadsheet.
If this happens frequently enough, then Excel might not be a reliable system to use, impacting workflows, analysis, and decision-making.
It takes a lot of work setting up spreadsheets, preparing formats and calculations.
But even after you get all the data points on screen, the numbers and illustrations can only go so far.
Excel lacks the elaborate graphic display and pre-set views that a proper investment and portfolio accounting system provides.
As one example, it lacks the robust functionality needed to handle sophisticated risk management models, which require more advanced statistical and financial analysis tools.
For better data, analytics, and maximum process efficiency, firms should move out of their Excel spreadsheets and into a proper investment management platform.
Such systems can more effectively and securely store the data, preventing the risk of mass tampering or deletions that oftentimes cannot be recovered or restored in Excel.
At the same time, many firms will continue to use Excel for the time being, and in those cases, the key is to use Excel as efficiently as possible.
Automation is one way to achieve such efficiency.
If your team is routinely entering and aggregating data into spreadsheets, those workflows are ripe for automation. Done manually, they are slow and error-prone processes that can be done faster and more accurately by an automated bot.
The bot can be programmed and deployed into the required applications, performing the tasks whenever they need to be done. For example, if certain data and files are ready from an email, custodian website, or portal, the bot will be triggered into action, retrieving that information and placing it into the desired cells in the desired format.
Empaxis streamlines and automates Excel-based processes for wealth and managers. We build the bots, deploy them into your setup, and maintain them regularly.
Additionally, the use of artificial intelligence can perform more complicated functions that require more thinking and analysis, but AI is not yet a finished product either.
Learn more about AI in investment management.
Wealth and asset managers have long relied on Excel for various workflows.
But with rising competition and demands placed on investment firms, there is a strong need for increased speed, accuracy, and efficiency in all workflows.
Spreadsheets have limitations, as shown by the examples above, and firms must decide what they’ll do about it. They can be mindful of the limitations, instead opting to keep Excel, optimizing their existing processes by incorporating automation and machine learning. Firms can also move to more sophisticated investment management platforms that easily integrate, store, and display data that is both accurate and secure.
In any case, investment managers know what Excel spreadsheets have to offer, both good and bad, and they know there are always options to do things better.
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