6 Reasons Why Documentation Is Important for Your Investment Operations

If your investment firm struggles with inefficiency in its middle- and back-office processes, those struggles illustrate why documentation is important.

Whether you’ve lost key operational staff, or your reconciliation and reporting processes are disorganized, having good documentation can help eliminate problems you’re facing.

Do you have documented procedures? If so, when was the last time you team looked at them?

Whether or not you have any, and whatever your operational issues you face, proper documentation makes a difference.

Why Documentation Matters for Your Investment Operations

1. Investment Firms Mitigate Risk from Employee Turnover

If you have no documentation, operational risk increases when a talented back-office team member leaves the firm.

That's because the departed employee takes their operational and portfolio accounting know-how with them.

As a result, you and your staff haphazardly scramble to finish the daily reconciliation reports.

Documenting all procedures from start to finish will reduce the most negative effects of turnover when it occurs.

Following process documentation best practices, you will feel more secure the next time someone leaves your organization.

Another way to mitigate employee turnover risk is by partnering with a firm like Empaxis.  We help investment firms reduce risk by leveraging automation in their workflows and providing back-office and middle-office servicing, ensuring the work always gets done.

In the process, Empaxis will modify or create documentation for the workflows that you can use.

2. See Your Operations Process from a Fresh Perspective

When documenting the processes step-by-step, you see things differently.  

You may have executed the steps according to memory and years of experience. Now you'll have written instructions.

Think about the people who will use the documentation. Try and make it foolproof so that anyone who has the documentation can easily complete the task.
Download Our Automation Guide for RIAs.

Don't ignore points you'd take for granted. Foolproof everything.

  • Take screen shots
  • Document all side notes, different scenarios, and exceptions to the rules

Yes, creating or revising documentation may take several hours.

But if you want an awesome step-by-step operations processing guide, you have to put in the effort. Transferring everything from your head into clear and succinct wording isn't easy, but it'll be worth it.

And if you already have documentation, albeit outdated or inaccurate, you might realize the workflow is inefficient:

  • Workflows can be automated. See our Automation Guide for RIAs for automation use cases.
  • Some steps are no longer necessary.
  • You’re not fully utilizing all features and functions in your portfolio accounting system.

In addition, by looking at everything, you might realize points were left out because:

  • the workflow changed, and you haven't updated the document in a long time.
  • you forgot to add other steps.
  • you assumed others know everything you know, so you left out points.

3. Execute Processes More Consistently

When you rely solely on memory to get work done, you might forget some steps.

For example, you'll forget to create backup files, or you’ll forget to remove or edit certain data points.

If you have process documentation that reminds you to watch out for any missed points, then you’ve reduced the risk.

By having that guide, all someone has to do is follow the instructions, and there will be a consistent and predictable outcome every time: accurate, error-free reports that are ready for the client, performed in the way you want them done.

4. Give Your Operations a More Professional Image

Having documentation not only promotes consistency in your processes, but it also sets a standard. Documented procedures indicate a clear goal to be achieved and the steps to achieve that goal.

Having standards shows you have control over the work, and it conveys to others a sense of confidence, authority, and trust in your operations.

Furthermore, when you set standards in documented format, it enhances your credibility and professionalism to those that matter most:

  • The clients will feel secure knowing a system is in place to deliver timely, accurate reports.
  • Those above you see see you’re taking charge.
  • Those who report to you see you take the processes seriously, and they’ll follow suit.
  • Regulators will view your investment operation as in good standing.

5. Use as a Training Tool for Future Operations Hires

Not only does a good documentation help prevent operational risk in case of turnover, it serves as an excellent resource to train new members of your organization.

A straightforward, easy-to-follow set of instructions will save you time, effort, and resources in getting the new hires up to speed.

In turn, you’ll see how effective the documentation is when someone uses it for the first time. If they struggle with your instructions, you’ll learn how to improve the document so that when the next new hire arrives, things will be easier.

6. Err on the Side of Compliance

Having documentation should be considered following best practices. Not only have you set standards and step-by-step instructions to meet the goals, but you’re increasing the transparency into your back-office operations.

Should the firm be audited, documenting your reconciliation and reporting processes is one more way to show your organization takes protocol and compliance seriously.

Section 404 of the Sarbanes Oxley Act (SOX) requires management and auditors for publicly traded companies to establish internal controls and reporting methods on the adequacy of those controls. Even if the provisions in SOX do not apply to your firm, let the regulations serve as a guide for broader and stricter reporting rules to come.

Documentation Goes Beyond Operations

Documentation is not only for your workflows, but also for your interactions with clients.

Investment firms can avoid client complaints and run-ins with regulators by proving that the firm had properly educated the client about their investments.

Basic record-keeping to verify that advisors met regularly with their clients, discussed their investment objectives, and made them aware of any fees and risks are all ways investment advisors can protect themselves should questions or complaints arise, according to FINRA staff members.

Investment Managers Need to Get Started with Documentation

Operations management and executive teams can clearly see why documentation is important.

By following best practices, you reap the benefits of what good documentation can bring to your operations.

Documenting the procedures shows the maturity of your operations, and it shows that you as a firm know what you’re doing.

Empaxis helps investment firms run an efficient, scalable, and cost-friendly operation by managing their middle- and back-offices.  ISO-27001 compliant, and SOC I and SOC II certified, we can help you create documentation around all procedures, promoting transparency and compliance.

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