Investors are more demanding than ever before, have higher expectations and, because they have a wide variety of investment opportunities, must not be taken for granted. Investors have less loyalty than ever to a single fund family for ongoing investment.

They may decide to seek out other fund opportunities because of investor relations issues, fund administration errors, fund accounting performance or reporting reliability. Consistency and stability are important to investors. Communication must be a priority for fund sponsors to give investors the transparency and assurance they need. By concentrating on communications in investor relations, fund management makes a wise investment in the foundation of the fund, its source of capital. Not to prioritize excellence in investor communications, fund management takes on a lot of risk. Money, reputation and future business are on the line.

At Phoenix American, we know many investor relations providers frustrate their clients with a variety of errors, omissions, miscalculations and miscommunications on a day-to-day basis. These kinds of failures are enough to permanently sour a fund sponsor’s relationship with an investor relations provider. Investor relations failures are irritating and distracting to fund management while investor and advisor confidence in the fund’s competency can be shaken. By the time a fund management, disappointed by the performance of the investor relations partner, has embarked on the time-consuming process of transferring asset and investor data to the systems of a new provider, the damage to their reputation has been done.

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Where Investor Relations Goes Wrong

In the many processes of investor relations, a variety of errors and miscues are possible. Investor-facing errors can be very damaging financially and reputationally for a fund. Investor relations failures are usually caused by one or more of three issues:

Systems – Investor relations systems need to be able to track, calculate and communicate according to the needs of the investor and client fund. Inadequate systems cause failures.

Controls – Internal controls must be in place to prevent data input errors and adequately proof output. Insufficient internal controls in the investor relations process cause failures.

Communication – Effective communication among teams within an investor relations firm is critical as separate processes use overlapping data sets. Ineffective communication causes failures.

Investor relations are at the heart of fund administration. The processing, preservation and dissemination of investor data could not be more important for fund management. It is based on this data and the related output of the investor relations team that both investors and managers make crucial decisions. The quality and consistency of investor relations reporting must be reliable.

There are inexperienced and under-equipped investor relations firms that accumulate and compound day-to-day errors when working at scale with millions of dollars and thousands of client investors. Reliance on multiple non-specialized systems, Excel spreadsheets and manual processes to process data and perform calculations makes errors inevitable, and investor disappointment a result. This is costly.

Lack of Effective Communication

Because fund accounting, investor relations, tax processing, fund administration and financial reporting each have their own data sets, challenges arise when teams fail to interact properly. Due to a lack of communication among the various teams:

A chaotic office blunders its way to failure due to a lack of communication.
  • Management is unable to understand the bigger picture underlying the data from the investor database.
  • Investor relations teams are not aware of the downstream effects when they rely on inappropriate data sets for investor relations processes.
  • Communication breaks down within investor service organizations resulting in significant operational risk.

These mistakes may be readily prevented if personnel throughout the investor relations structure communicate effectively on a regular basis.

Even at major fund administration firms, teams often operate in their own separate silos. Far-flung teams may be based all over the world. Some functions are outsourced. The potential for miscommunication and the known operational errors that result represents a significant business risk for client funds.

A Reputation for Investor Relations

There are numerous points in the process of investor relations operations when a lack of precision, automation and experience can result in embarrassing and costly blunders. In the eyes of investors, financial advisors and auditors, a fund’s reputation for investor relations blunders reflect on the general competence of the fund sponsor. Advanced, experienced and integrated investor relations architecture is essential to the efficiency and positive reputation of a modern investment fund.