PERFORMANCE REPORTING: THE NEXT FRONTIER
Performance reporting is a hot topic in the financial services industry, but what should be an asset (if you'll pardon the pun) to strengthening client relationships is often a source of frustration. If your performance reporting is generating more questions than answers, it's time to reconsider your approach.
The obvious purpose of performance reporting is to answer the question in the hearts and minds of all investors, "How am I doing?" Clients want to know how much their account value has grown, why it has grown (or not), and how it's reasonably protected from loss. Only when fortified with this information can investors truly understand the implications of past actions (yours and theirs) and make appropriate investment decisions.
A few pointers on performance...
Context is king
First and foremost, don't think of performance reports in isolation. Rather, develop a cohesive strategy in which statements, performance information, and online account access are complementary components of an integrated client-reporting experience.
When comparing account performance to an industry index, make it a real benchmark by selecting an index that relates to the client's investment objectives and portfolio. Better yet, let the financial advisor and client select the index that's most relevant. Establish helpful context and demonstrate the depth of your investment savvy by supplementing the data with a verbal explanation of the economic factors that influenced results.
Give the advisor a voice
To provide real insight about results and investment strategy, allow the advisor to offer personalized commentary. Obviously, good results are the most tangible evidence of the advisor's value to the client. But don't underestimate the added value of customized information, particularly to reassure clients in a turbulent market.
You can't get too personal
Calculating a personalized rate of return shows real commitment to superior performance reporting. To make it truly meaningful, measure net investment value (the client's total investment minus withdrawals) against total current value. Show historical performance along with the current rate of return to encourage a long-term view.
Tracking progress toward the client's own established goals is the holy grail of personalization. Ideally, compare return on investment to investment objectives and current asset allocation to target allocation. This completes the financial planning loop and provides strong rationale when rebalancing is warranted.
Don't beat a dead pie chart
Speaking of asset allocation, it's unfortunate that one of the most important factors related to investment performance has been relegated to the ubiquitous — and limited — pie chart. In theory, it allows you to show the relative value of investment categories to the whole. In practice, it gets messy very quickly if the client has a small percent of portfolio invested in a couple of categories.
More importantly, it doesn't allow you to show the relative value of investment categories, the total portfolio value, and the change in value over time all in one view. Impossible, you say? Addison can show you how.
Contact us for more information
The obvious purpose of performance reporting is to answer the question in the hearts and minds of all investors, "How am I doing?" Clients want to know how much their account value has grown, why it has grown (or not), and how it's reasonably protected from loss. Only when fortified with this information can investors truly understand the implications of past actions (yours and theirs) and make appropriate investment decisions.
A few pointers on performance...
Context is king
First and foremost, don't think of performance reports in isolation. Rather, develop a cohesive strategy in which statements, performance information, and online account access are complementary components of an integrated client-reporting experience.
When comparing account performance to an industry index, make it a real benchmark by selecting an index that relates to the client's investment objectives and portfolio. Better yet, let the financial advisor and client select the index that's most relevant. Establish helpful context and demonstrate the depth of your investment savvy by supplementing the data with a verbal explanation of the economic factors that influenced results.
Give the advisor a voice
To provide real insight about results and investment strategy, allow the advisor to offer personalized commentary. Obviously, good results are the most tangible evidence of the advisor's value to the client. But don't underestimate the added value of customized information, particularly to reassure clients in a turbulent market.
You can't get too personal
Calculating a personalized rate of return shows real commitment to superior performance reporting. To make it truly meaningful, measure net investment value (the client's total investment minus withdrawals) against total current value. Show historical performance along with the current rate of return to encourage a long-term view.
Tracking progress toward the client's own established goals is the holy grail of personalization. Ideally, compare return on investment to investment objectives and current asset allocation to target allocation. This completes the financial planning loop and provides strong rationale when rebalancing is warranted.
Don't beat a dead pie chart
Speaking of asset allocation, it's unfortunate that one of the most important factors related to investment performance has been relegated to the ubiquitous — and limited — pie chart. In theory, it allows you to show the relative value of investment categories to the whole. In practice, it gets messy very quickly if the client has a small percent of portfolio invested in a couple of categories.
More importantly, it doesn't allow you to show the relative value of investment categories, the total portfolio value, and the change in value over time all in one view. Impossible, you say? Addison can show you how.
Contact us for more information
