Poor operational performance is a drag on investment firms, both in terms of client satisfaction and the bottom line.
Back-office reconciliation reporting errors hurt your credibility, and incompetence is an excuse for the client to move their wealth and assets to rival money managers.
Operations personnel may not be in direct contact with the client, but you and your middle- and back-office reporting analysts play an integral role in the client experience by delivering quality and reliable reports.
If you’re serious about increasing operational performance, which in turn improves the client experience and gives you an edge over your competitors, then you should follow Six Sigma.
Six Sigma is a data-driven approach to identify and significantly reduce errors in your products and services, as well as improve on weaknesses within your leadership and management structure that result in errors down the chain.
You can get started by assessing your operations.
Cash and positions breaks due to duplicate transactions, missing prices, improperly inputted data, etc. are killers to daily reconciliation reporting accuracy, not to mention your performance.
Do you simply react to errors, or do you identify the root causes of errors in order to prevent them from happening again? If your response is the latter, your commitment to Six Sigma methodology may reveal that your operations analysts lack proper training and good documentation to perform their jobs. You might also conclude it’s time to invest in an automated quality control tracking system to catch errors where human efforts are inadequate and where custodial data is faulty.
Focusing on the root of problems, not the branches, will most certainly reduce the number of mistakes.
Having a system in place to identify the source of errors and steps to fix them will cut down the time it takes for your back-office operations staff to finish tasks.
One of the main reasons reports are delayed is spending time looking for elusive breaks in positions and cash. Another reason is manually fixing the same break for potentially hundreds of accounts.
If your staff knew the right methods to find mistakes more quickly, or if there was a system to automate the reconciliation process for the same mistakes, your trading and investments teams will get will get the reports done before the deadline.
Our previous blog talks about what to do about reconciliation reporting errors, and by following Six Sigma, you’ll create a more perfect middle- and back-office operations.
Commitment to process improvement will lead to a reduction in costs associated with a task, which frees up resources for other needs.
Perhaps you realize your current portfolio accounting software is too expensive, so you opt for a more cost-friendly service. Maybe the software is too difficult to use and your overhead costs are high, and you conclude that outsourcing your reconciliation reporting and billing needs is a good way to achieve your advisory’s operational and financial goals.
If one employee could reduce a task’s completion time by 20 to 30 minutes each day, that translates into thousands of minutes saved every year, which is more than one full workweek of time and resources that could be invested in other areas of operational improvement. Now multiply that one employee by however many staff members you think can be more efficient in their time, and now you’re talking about serious cost savings.
Commitment to excellence is not just a slogan for the Oakland Raiders. The reality is Six Sigma encourages just that: excellence.
Like a good football coach getting the players to buy into a vision, an operations manager does the same with his or her back-office reporting team. The staff is encouraged to take pride in their work while providing a series of steps to achieve the desired goal. Following the process yields positive results, reinforcing the pride in a job well done and a desire to achieve more.
Just as an asymptote is a line that never hits zero with each movement along the axis, you might not reach zero mistakes, but by dedicating yourself to never-ending improvement, you certainly get closer and closer to zero.
Whether you’re feeling the heat from executive management to run a better hedge fund or asset management operations, or you simply hold your team to a higher standard, then Six Sigma is your solution.
You will achieve a more efficient operations via reduced errors, cost savings and time saved. You’ll be in better standing with your firm as reports are delivered on-time with guaranteed accuracy, strengthening your clients’ trust in your firm and putting your investment advisors at ease knowing they are delivering a quality product and service.