How Reporting Can Be Your Edge with Retail Investors

Challenges of supporting retail clients

While the opportunity to attract new participants presents a compelling reason for firms to adapt their technology and operations, engaging with retail investors also creates a unique set of challenges.

Initially, the user experience is often different for individual investors who enter the market expecting greater transparency, increased product liquidity, and an overall experience similar to what they receive in the public markets.

Retail clients also bring varied levels of financial literacy and investment experience. Complex financial data must be presented clearly and accessibly, avoiding jargon that may be unfamiliar. For retail investors with a lower risk tolerance and inclination to focus on short-term gains rather than long-term strategies, education and tailored reporting frameworks ensure investors receive the information they need to build trust in their investments.

The arrival of retail investors also comes with new compliance obligations. Regulatory bodies such as the SEC, the Financial Conduct Authority, and the European Commission are implementing stringent rules to provide retail investors with the same level of disclosure and protection traditionally afforded to institutional investors.

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Strategies to overcome reporting obstacles

To effectively engage with this new investor base, consider practical strategies that enhance transparency and ensure the accuracy of the information you report:

• Integrate modern technology

Automated reporting tools can streamline processes, reducing the potential for error and enhancing the overall efficiency of your reporting mechanisms. As the complexity of analytics and reporting grows, and you face more demands to personalize information, unified data will be critical to providing more timely and accurate reports — en masse — to retail clients.

• Leverage self-service tools

Providing information to stakeholders in a format that’s both usable and meets reporting deadlines is a challenge. Self-service reporting enables managers to create reusable templates that capture the exact information stakeholders need and present it in a visually compelling, easy-to-digest format.

• Establish consistent reporting standards

Uniformity in reporting practices not only aids in regulatory compliance but also builds trust with retail investors. High-quality reports that are clear and accessible are especially important for this new class of investors, who may not have the same level of financial literacy as institutional investors. By adhering to consistent standards, firms can ensure their reports are accurate, informative, and accessible.

• Provide educational resources

Materials like videos, webinars, and FAQs can help investors better navigate the reporting process and understand the information they receive — even when some jargon slips in. A proactive approach to investor education will help firms build a stronger reputation as a trusted partner for retail clients.

• Collaborate with external providers

External providers often specialize in various aspects of reporting, from data analysis to regulatory compliance. Leveraging their expertise can help firms navigate the complexities of reporting to a diverse investor base, ensuring that all necessary information is accurately and comprehensively presented.

RELATED READING: Keep Reporting in Synch with Your Evolving Business

Building infrastructure for retail and institutional clients

As retail investors move into private markets and institutions continue a steady flow of investment, firms must establish a foundation that supports the distinct requirements of all clients.

To remain agile and meet growing industry demands, private market funds need flexible solutions that enable them to access, analyze, and quickly deliver data to key stakeholders. Interoperable systems that help automate and streamline processes will be essential.

For example, with a modern technology infrastructure, an IR team supporting an institutional investor can efficiently respond to requests for greater fee transparency or provide a detailed performance view of the deal/asset level to help LPs understand what’s driving value. On the retail side, managers must deliver more frequent reporting, typically quarterly and sometimes even daily. Implementing modern tools will be critical to generate reporting at scale to a massive retail base while ensuring high-fidelity and easy-to-digest reports for each recipient.

Modern solutions can reduce the risk of error, enhance the reliability of reporting, and streamline data flows to improve accessibility, resilience, and scalability. This shift allows private markets managers to better respond to changing market demands — whether it’s on the retail or institutional side — while optimizing the client experience.

Keep reading to learn more about shifting industry dynamics.