Financial Reporting
Transcript of Financial Reporting
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Good morning and welcome!
The program will begin shortly.
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Recasting Financial Reports:
Innovations in Family Office
Reporting
Heather Asher, Family Office Exchange
W. Jackson Parham, Jr., Eton Advisors, LP
Michael Madigan, Advent Software, Inc
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Heather Asher Family Office Exchange
Senior Relationship Manager
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Heather Asher is a senior relationship manager for Family
Office Exchange (FOX). Part of FOX’s family office team,
she provides a variety of member services and works to
increase membership within the business-owning market. In
addition, Heather has taken on a new role in member
development and is responsible for generating new
member acquisitions by engaging prospective family office
and advisor members to determine their needs and
priorities. She also works on FOX’s Next Generation
Network by engaging younger family members with
education and networking.
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W. Jackson Parham Eton Advisors
Chief Investment Officer
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Jack has 25 years of experience in finance and oversees
Eton Advisors' investment group. He works closely with
family clients, where he is responsible for the overall
integrated investment process. Prior to co-founding Eton
Advisors, he served as CIO of the UBS Multi-Family Office
Group. Before that, Jack was CIO and founding principal of
the US Trust MFO Group, where he was a member of the
U.S. Trust Investment Strategy Committee, U.S. Trust
Open Architecture Investment Committee, and the
Investment Committee of CTC Consulting. Before that,
Jack served as Partner at Dixon Odom Financial Advisors,
and earlier he was the Director of Investment Services at
Regions Financial Corporation.
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Michael Madigan
Advent Software, Inc.
Director, Product Management,
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Mike Madigan joined Advent in 2004 and is the
Director of Product Management for the Portfolio
Management & Reporting team. With a particular
focus on the strategic direction of Advent Portfolio
Exchange, Mike and his team work closely with
Advent’s Product Development and Services teams
to deliver high quality solutions to our investment
management customers. Mike holds a Bachelor of
Business Administration in Finance from University
of Notre Dame and a Masters in Business
Administration from the University of California,
Berkeley.
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Agenda
• Highlights from recent financial
reporting study
• Different approaches to reporting
• Family office case studies
• Best practices, outcomes and lesson
learned
• Wrap Up
• Q & A
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Where Does the Time Go?
Accounting and reporting consumes an average of
32% of the family office’s time.
Common Contents of Quarterly Report:
• Statement of Net Worth or Balance Sheet (82%)
• Income and Expenses (77%)
• Investment Holdings (75%)
• Investment Asset Allocation and Performance (74%)
• Cashflow Summary (54%)
Common Contents of Quarterly Report:
• Net Worth Statement (78%)
• Summary Narrative (64%)
• Investment Allocation and Performance (63%)
• Cashflow Analysis (59%)
• Spending Summary (47%) 7
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Financial Conversations – Meeting Frequency
How often does the office staff meet with clients to review financial reports?
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Custom Reporting Remains a Challenge
How many variations of the standard reporting package does the staff create?
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What’s Next? Family Office Wish Lists
Enhancements to Existing Reports
• Real time availability
• More meaningful graphics
• Online dashboards
Investment Reports
• One report that reconciles the financial reports to the portfolio performance reports
• Attribution analysis
• Portfolio, fund and holdings correlation reports
• Look through asset allocation reports
Forecasting
• Cash flow projections (up to five years out)
• Better modeling and forecasting for short- and long-term analysis
Annual Reports
• Annual report card of financial health
• A report of progress relative to stated goals
• Annual report with estate plan, insurance, goals, etc.
What types of reports do you wish that you could provide but do not currently?
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Reporting Spectrum
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Customized / Internal Reporting Solutions
Standardized / External Reporting
Solutions
Hybrid / Combination approaches
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Goals of Reporting Process Improvement
1. Re-configure investment reports to support Goal-Based
investment framework
2. Build in flexibility to meet differing client needs and
preferences
3. Shift to a more visual approach to financial reporting
4. Reduce time spent compiling, reviewing, and publishing
quarterly investment reports
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An Approach to Quarterly Reporting
• Capture – Capture all relevant client data from its source
– Store in common format in proprietary database
• Categorize – Create proprietary taxonomy to categorize assets
– Overlay data with account, entity, portfolio, partnership, and family groupings
• Visualize – Utilize data visualization software to create user-friendly
dashboards
– Incorporate flexibility in report packaging and level of detail
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Defining the reporting world
• Reporting is a broad term that encompasses the
full spectrum of Data, Presentation & Delivery
– Data supports the story you want to tell
– Presentation style needs to be substantive while
ranging from logical to differentiating.
– Delivery of reports needs to accommodate how
your clients want to receive the information
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Top Five Considerations
1. Audience – Who are the reports for? How established is
relationship? What is level of sophistication?
2. Purpose – What is desired outcome? Focus on reporting
portfolio performance or making investment decisions?
3. Timing – When do they want the information? How long
after period-end? Before, at or in lieu of meeting?
4. Content – Consistent from period to period? What is right
balance of summary vs. details? Importance of graphical
vs. tabular presentation?
5. Delivery – In person meeting? Importance of online?
What about emerging technologies?
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Case Study #1: Goals-Based Reporting
• Issue – Family utilizes a goals-based approach to asset allocation,
wherein goals are specifically defined, quantified, and prioritized.
– Asset allocation is designed to maximize the probability of achieving each goal “layer:” Needs, Priorities, Aspirations.
– Is the family’s current portfolio invested accordingly?
• Solution – Classify each of the family’s assets according to the appropriate
goal “layer.”
– Roll up those classifications by family member, entity, household, etc.
– Use data visualization to show current asset levels relative to stated goals in a “hierarchy of needs” framework.
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Case Study #1: Goals-Based Investment Report
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Case Study #2: Portfolio Risk-Exposures
• Issue – The family’s portfolio includes a variety of hedged,
specialty/niche, and hybrid investment strategies, making
traditional asset class categories less-than-meaningful.
– What is the family’s overall asset allocation from a risk exposure
perspective?
• Solution – Utilize Eton’s proprietary asset taxonomy to classify all assets by
a common set of metrics (beyond the traditional “security master”
categories provided by asset custodians).
– Create views of the portfolio by each category in a side-by-side
comparison.
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Case Study #2: Portfolio Risk Exposures
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Case Study #3: Long-Term Portfolio Perspective
• Issue – Family divides its assets into two pools:
• Constrained Assets: assets subject to tax, liquidity, or other restrictions discouraging their near-term sale or re-balancing. Includes a concentrated position in a legacy timberland asset.
• Unconstrained Assets: actively managed portfolios unrestricted by tax, liquidity, or other issues; generally diversified and professionally managed.
– Family’s goal is to gradually shift the composition of Total Assets from Constrained to Unconstrained without significant tax or liquidity “haircuts.”
• Solution – Report on Constrained, Unconstrained, and Total Portfolios on a
quarterly, annual, and multi-year basis.
– Use data visualization to show the evolution of the portfolio over time.
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Case Study #3: Portfolio Composition over Time
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Case Study #4: Manager Performance
• Issue – Family’s portfolio includes more than 50 different investment
managers across a variety of strategies and asset classes.
– Given the sheer quantity of investment managers, it is difficult to
present manager performance in a way that allows for quick but
meaningful interpretation by family members and trustees.
• Solution – Convert tabular data on manager performance, benchmark
performance, and portfolio market values into an easily
interpreted graphic.
– Allow filtering by asset class, strategy, and time period into order
to drill down as needed.
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Case Study #4: Manager Performance
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Case Study: End of Period Client Management
• Challenge:
– Content personalization is often at odds with
operational efficiency
– Establishing consistency from period to period
• Solution:
– Personalize report packages once and then deliver
same package in future periods
– Focus on automation as much as possible
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Case Study: End of Period Client Management
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Case Study: End of Period Client Management
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Case Study: End of Period Client Management
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Case Study: Dynamic Intra-Period Client Management
• Challenge:
– On demand meetings are replacing the end of period
review
– The longer it takes to answer client questions, the
more credibility is lost
• Solution:
– Be prepared with next level of detail
– Develop a dynamic client view within your systems
that is personalized for each client type
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Case Study: Dynamic Intra-Period Client Management
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Case Study: Dynamic Intra-Period Client Management
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Case Study: Interactive Online Delivery
• Challenge:
– Static reports are no longer enough
– End of period is too retrospective
• Solution:
– Just as your clients drive content, let them determine
how they want information delivered
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Case Study: Interactive Online Delivery
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Case Study: Interactive Online Delivery
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Outcomes & Lessons Learned
• Maintaining data integrity, homogeneity, and
completeness is a primary requirement
• Taxonomy is scalable across client portfolios, but
requires ongoing monitoring and updating
• Staff time required to create and publish quarterly
reports was reduced by approximately 75%
• Family offices must make several key decisions
before embarking:
– Which functions to in-source and which to out-source???
– Which tools to build and which to buy???
– How much flexibility is optimal, given the tradeoffs???
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Best Practice Ideas
• Develop reporting to specific client needs
• Illustrate to inform, not overwhelm
• Align content and frequency with client’s level of
sophistication, not system constraints
• Reflect clients’ individual and collective goals
• Encourage on demand meetings to ensure
understanding & enhance the dialog
• Increase preparedness for intra-period dynamics
• Innovate & embrace the technology trends 35
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Wrap Up
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Q & A Discussion
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Thank You!
Heather Asher
Family Office Exchange
312.327.1274
W. Jackson Parham
Eton Advisors, LP
919.442.1545
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Michael Madigan
Advent Software, Inc
415.645.7869
FOX Webinar Contact Info
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• Founded in 1989 to serve as an advocate for wealth owners
and their offices spread throughout 24 countries worldwide.
• Now educating over 140 MFOs and private wealth advisory
firms about how to best serve wealth owners.
• More than 40 full time staff employed at our Chicago
headquarters and London office.
• Serving more than 310 families with multi-
generational wealth.
• On average, our family members own total assets in
excess of $400 million
• About half retain a direct ownership interest in the
original business that created the family’s wealth.
• Four of five of our members operate established
family offices more than 5 years old.
Family Membership Profile Family Office Exchange at a Glance
Family Office Exchange Overview
Source: Family Office Exchange Research
North and South
America: 415
United Kingdom,
Europe &
Middle East: 28
Asia, Australia,
& New Zealand: 13
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