3 basic reports every wealth owner should have at their fingertips
Most specialized technologies should provide anytime, anywhere access to individual/entity/family level summary of net worth, with a granular view of asset classes and comparative over time.
More often than not, we find ourselves overwhelmed by heaps of fragmented data, with very little time to process it all. The challenge is to make this financial data work for you; to know what to look for, and where to find the information you need or want to successfully monitor your wealth. Data, when consolidated into reports and insightful analytics, empowers wealth owners to stay engaged with their advisors and finance managers, on a real-time basis.
So, what are the numbers you should be looking at and where do you find them? It all boils down to three fundamental aspects.
1. What is my net worth today and how has it changed in the last week/month/quarter?
While this is a consolidated macro level number, you can have it at your fingertips, only if you're using a cloud-based asset management software and your team is recording and updating all investment transactions. Most specialized technologies should provide anytime, anywhere access to individual/entity/family level summary of net worth, with a granular view of asset classes and comparative over time.
Without this, you're probably dependent on manually compiled monthly or quarterly spreadsheets which stay static till the next report and carry the risk of manual error.
2. What caused the growth or decline in my net worth?
Personal Cash Flow Statement
Net Worth (Opening Balance) + Capital contribution + Income from investments + Investment appreciation - Capital withdrawal - Fees/expenses on investments - Investment depreciation = Net Worth (Closing Balance)
Knowing how much your net worth changed gives you only a part of the picture. Equally important is knowing whether that change came from an investment/expenditure or whether your existing investments appreciated/depreciated. A cash flow statement of your personal wealth explains the source of change in net worth and prepares you to ask all the right questions to your advisors.
3 What is the source of appreciation/depreciation?
Knowing which asset classes appreciated/depreciated, and by how much, not just explains the change in net worth but also gives you fodder for review/rebalancing of your portfolio.
For the macro picture, compare the change in annualized returns (IRR) of all asset classes. This helps you rebalance asset allocation mix to stay on course with your strategy, or increase allocation to more profitable asset classes. At a micro level, analyze returns (IRR) grouped by investment instruments, advisors, sectors or similar parameters. This reveals which investments or advisors are outperforming their peers and those that are dragging down your returns.
To stay in control you need the data to work for you. Stay ahead with the latest in wealth-tech platforms, designed to empower you with consolidated data and insightful analytics at your fingertips.(The writer is Managing Director of Asset Vantage)