Cloud ERP

March 03, 2021

Top 5 Challenges in Wealth Management Accounting and How to Solve Them

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It’s an excellent time to be a wealth management firm. The number of millionaires in North America almost doubled between 2010 and 2019, and billionaires saw their wealth jump by nearly 40% over the past year. Through the pandemic, while many other industries struggled, revenues for investment management firms remained largely intact. Despite their rosy outlook though, firms are facing their share of challenges. We’ve identified five of the most pressing challenges in wealth management accounting that can be solved fairly easily with accounting software designed for the industry.

1. Integrate Data from Different Systems

A business as multi-faceted as wealth management requires many software tools to manage the many aspects of the operation. With separate, disconnected systems, though, comes duplicate data entry and delays in accessing the facts and metrics you need.

Accounting software for wealth management companies designed with integration in mind allows you to share data between applications, including Solovis and Addepar, through APIs. APIs are critical in supporting the best-of-breed approach to your business management software, allowing you to select purpose-built applications that all work well together.

2. Consolidations Take Too Much Time

Complex, multi-entity consolidations can take days to complete. The traditional approach to consolidation combines old fashioned manual labor, semi-structured processes, and a range of different technologies (like lots of spreadsheets, or “spreadware” as we like to call it) to bring together data and information. Unfortunately, even with the best efforts and communication, manual consolidations are time-consuming and error-prone — yet 58% of companies continue to manually consolidate.

Wealth management accounting software can literally save you days of effort in the consolidation process (this Sage Intacct client cut quarterly reporting time from 100 hours to just minutes. With data housed inside a single system, you can automate the elimination and consolidation entries. Similarly, you can automatically reconcile inter-company accounts and elimination entries posted to deal with inter-company transactions and balances.

Automating consolidations can increase the finance function’s credibility by demonstrating the ability to deliver accurate, timely data, helping your accounting team become a valuable, strategic source of information.

3. Inconsistent Chart of Accounts Adds Complexities

Accounting within wealth management companies typically involves multiple entities, with additional entities added frequently. Setting up a new physical or virtual entity in many software applications using a linear chart of accounts takes too much time. Users will often add an account in one entity and not in others or use different naming and numbering conventions when they do — leading to an inconsistent chart of accounts.

An accounting software system for wealth management firms that incorporates a shared, dimensional chart of accounts means you can quickly configure your new accounts across all entities. Enter a new account once, and it is available for use in all entities.

Additionally, with a dimensional chart of accounts, you can tag financial transactions and non-financial data in a statistical ledger with dimension values. Using dimensions, you can add business context to your data easily, giving you more flexibility for reporting.

4. No Access to Real-time Data

When your accounting team has to spend time inputting data into spreadsheets to perform consolidations, it creates a time lag that makes transparency impossible. That time lag between your business activities occurrence and reporting can lead to missed opportunities to further invest or react to negative effects to avoid loss.

Wealth management accounting systems bring greater visibility across the enterprise, including to inter-company transactions among entities. All of your multi-entity information resides in one system where it’s continuously consolidated. Your decision makers have access to real-time, consolidated information at the press of a button instead of waiting days or weeks. Dashboard analytics provide instant, shared access allowing the finance team to track financial data and key metrics over time and can even provide answers to questions you not even have asked yet.

5. Increasing Headcount

As your wealth management company grows, you often need to add personnel to support the operation. This is especially true in organizations that rely on multiple, disconnect accounting applications not designed with wealth management firms in mind. Increasing your headcount is not only costly — it’s increasingly difficult. Firms are struggling to find qualified finance professionals in today’s competitive job market.

Accounting software designed for wealth management companies provides efficiencies that can alleviate the need to hire more staff in the first place. Storing all accounting data across all entities in one centralized database delivers consistency and productivity levels that allow firms to scale without increasing their headcount.

Designed for the Industry

Wealth management accounting software that’s purpose-built for the wealth management industry’s diverse strategy and entities is a critical differentiator over the traditional accounting solution driven by manual processes, spreadsheets, and disconnected applications. Sage Intacct is an ideal accounting system for wealth management firms and is the only AICPA-endorsed cloud financial management solution. In fact, more than 670 financial services firms rely on Sage Intacct to keep their operations running smoothly. Sage Intacct provides solutions to the challenges wealth management firms face, allowing them to grow profitably.

BT Partners works with wealth management firms throughout the country, helping them solve challenges and capitalize on opportunities. Our experience in the industry allows us to make recommendations for technology solutions and workflow improvements that give you the edge. Give us a call at 847-205-5015 to discuss how we can work together to help you thrive.

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