financial reporting

Webinar ©2012 Family Office Exchange

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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





Heather Asher Family Office Exchange

Senior Relationship Manager



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.



W. Jackson Parham Eton Advisors

Chief Investment Officer



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.



Michael Madigan

Advent Software, Inc.

Director, Product Management,



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.





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


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


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

©Copyright 2012. Eton Advisors, L.P. All Rights Reserved.

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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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COPYRIGHT ©2012 ADVENT SOFTWARE


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: 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: 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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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






Wrap Up



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Q & A Discussion





Thank You!

Heather Asher

Family Office Exchange

[email protected]

312.327.1274

W. Jackson Parham

Eton Advisors, LP

[email protected]

919.442.1545



Michael Madigan

Advent Software, Inc

[email protected]

415.645.7869

FOX Webinar Contact Info

Jennifer Muntz

[email protected]

312-327-1211

mailto:[email protected]






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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

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America: 415

United Kingdom,

Europe &

Middle East: 28

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& New Zealand: 13

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