Automated Account Reviews – Yet another request for Santa!

We all understand the importance of quality information in the decision-making process, and yet we all seem to have limited time to gather adequate and timely information. Both these elements, information and time, are key ingredients in the account review process. Failure to perform an account review violates many areas, but none more important than a violation of your fiduciary duty. The proper use of automated investment reviews can assist greatly in achieving your fiduciary duty. Too often however these automated reviews have limitations or are not properly utilized. If your organization is using an automated account review process here are some areas to consider:

Ensure that account investment objectives are current and appropriate, and that investments are consistent with those objectives.

Ensure that the investment review provides for an annual assessment of the portfolio in its entirety. This is particularly important when unique assets make up a portion of the account.

Include exception tracking that identifies and provides for follow up and resolution of exceptions such as securities not included on “approved” or “retention” lists, assets posing potential conflicts of interest, or asset concentrations.

Include performance measurements and a process for handling performance outliers.
Ensure that each asset is valued using an appropriate valuation process.

Identifies and reports on noncompliance with internal policies and procedures.

In addition:

A wholly automated screening process may not provide for the independent perspective customarily provided by an effective committee review process.

Automated systems may not address whether an account’s investment objectives have, or need to be, changed over time.

If account administrators are not included in the automated investment review process, key information such as account objectives, cash needs, grantor intent, and beneficiary requests may not be properly considered.

Vendor systems may only identify exceptions to a limited number of pre-set parameters.

Through our engagements with various organizations we have seen various applications of the automated review process – each having positive and negative attributes. We would be glad to share this information with you should you have the interest.