It's not just who and what-it's who needs to know what.

The past ten years have seen a dramatic change in the level of services that wealthy investors are demanding from their investment service providers. Portfolio reporting plays a major role in these enhanced wealth management services. Unfortunately, while the innovations in portfolio reporting technology have provided advisors with mountains of information and increased efficiency in their back-office operations, the client's specific needs have often been forgotten in the process. Frankly, many portfolio report designs forget that, as investment advisors, we are not in the "data providing business" but in the "data interpretation business." Customized reporting plays a central role in providing better more focused data interpretation. It is most effective when it draws on the client's specific needs in its design.

Let's explore customized reporting and its integral role in any comprehensive wealth management program. The choice of information and how it is aggregated, displayed and analyzed provide the focus necessary to proactively plan, execute and monitor an investment policy, thus producing better long-term investment performance.

Who Is The Reader?

Much as a doctor does not prescribe a medication until after a detailed physical examination, the investment advisor cannot recommend an appropriate reporting solution until the client undergoes his or her own "reporting examination." The first key question to be asked is, who will read the report? This drives the entire process. You have family patriarchs, their children, grandchildren, accountants, lawyers, trustees, planners and others who may be among the audience, each with different requirements. Their different requirements are what drive the need for customization.

The investor's professional specialists will require certain specific information. Accountants, for example, need tax information on realized and unrealized gains as well as investment income. The needs of all important client advisors should be identified and addressed as part of the reporting solution.

Family members likely have very different areas of concern and focus than their hired professionals. The head of the family is likely to be more interested in broader governance and investment issues. An emphasis on issues and recommendations for the portfolio as a whole is essential. They may also want to be sure that other relatives only see information relevant to them. Therefore, determining "what family members see what" can be a particularly important issue for complex families.

Another key factor in determining the report content is an understanding of the relative sophistication of the readers. As investment advisors we see a wide spectrum of client sophistication; some clients are highly sophisticated while others are not at all. While some basic information would be required for each of these extremes, it is clear that providing reams of analysis to an investor not requiring such detail might actually impair their understanding of the key issues, while the more sophisticated investor could find review of such information vital.

What Is Being Reported On?

Just as the intended audience of a report has a profound impact on the eventual report design, the nature of the assets themselves also has an impact. During the client assessment phase, identifying the various pockets of wealth, whether supervised or unsupervised, is vital. These pockets may be managed portfolios, trusts, charitable accounts or nonliquid wealth, such as real estate or private equity. All the assets, supervised and unsupervised, should be viewed in a consolidated manner, because they impact asset allocation from a risk and reward standpoint.

Also, with respect to the investments themselves, it is important that "hot button," client-specific issues are identified and monitored in the customized reporting solution. Whether it is the management of a stock concentration for an individual or tracking grant making for a not-for-profit, an in-depth understanding of the client's needs should be acquired and an appropriate solution crafted to respond to the specialized issue.

These questions, "who reads the report" and "what are we reporting on," may seem simple but they are vital questions to ask. The answers provide the insights needed to properly design a customized reporting solution.

Level Of Consolidation

To continue with our medical analogy, after performing an examination of the patient, the doctor applies his knowledge of medicine to the facts before recommending a therapy. In our case, we need to take what we have learned about the client and apply that against what we know about reporting before recommending a solution. There are several key report design concepts to consider. The first broad concept to consider is the level of aggregation and disaggregation to be applied to the report. A report can be consolidated or disaggregated in such a fashion that each reader only sees that which is relevant to him or her, providing focus to the reader as well as confidentiality to other parties.

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