Practical analysis for investment professionals
21 March 2013

Talk Your Walk: Client Reporting in a Goals-Based Framework

The CFA Institute Wealth Management Conference is an annual event covering tools and strategies important to private wealth management, including financial planning, practice management, and client relationship management. The CFA Institute Wealth Management 2019 Conference will be held in Fort Lauderdale, Florida, on 2–3 April.

High-net-worth investors aren’t yet convinced that their investment managers are earning their keep. So said Scott Welch of Fortigent at the opening session of the 2013 CFA Institute Wealth Management conference in Boston. “One of the few tangible things you can produce to prove you’re earning your fees is the performance report,” Welch said, adding that in his view, the current state of reporting is “shockingly bad.”

Welch maintains that getting the data right is necessary but not a sufficient condition for using client reporting to its maximum advantage. Clients and practitioners alike are increasingly overwhelmed with data that tends to be organized around operational realities like account structure or asset allocations. But Welch says that what’s needed is a view of portfolios and investment results that speaks directly to the end goals of each investor.

Think of a monthly or quarterly investment report as a sort of Rosetta stone that translates the numbers and statistics of investing into a progress report on the likelihood of achieving the multiple objectives that investment facilitates, from maintaining a standard of living to funding desired philanthropic activities to growing wealth for future generations. Focusing on investor goals makes interpreting investment results far more intuitive without sacrificing the quantitative inputs to optimal portfolio structure and management. Some 70% of attendees at the conference said that they use goals-based management to some extent.

Pioneering work in goals-based frameworks (such as from Ashvin Chhabra) informs the kind of analysis required to develop meaningful reporting, which parallels the natural conversations between advisers and clients as they explore objectives, risk tolerances, and resources at the onset of a new client relationship. What’s different about what Welch proposes is to continue that context of objectives and constraints as the lingua franca by which clients and their advisers monitor and assess progress, rather than the more traditional turn towards thinking in terms of asset allocation or risk factor allocation. Reporting systems can aggregate and categorize data far more easily and cheaply than just 10 years ago, so that investment results can be categorized and reported in less traditional ways that make more sense to clients and lead to productive discussions about what’s working, what isn’t, and why it matters.

Perhaps as important, developing a goals-based framework forces an investment adviser to consider the role of each portfolio component in achieving client objectives. Indeed, beyond the technical feat of aggregating data and mapping it to the correct goal “bucket,” the adviser’s perspective on the risk and return characteristics of portfolio instruments is vital to a sound investment policy that supports investor goals. This is likely to be an important competitive point of distinction among advisers, offering the potential to show a well-reasoned rationale for asset management choices that goes beyond some of the simplistic style box and star ratings that pass for investment advice.

Welch makes a compelling case for using what’s largely been viewed as the necessary evil of routine client reporting as a consistent frame by which to assess investment results in a context that matters most to investors. And, as Welch points out, technology is no longer a constraint but rather is the essential tool to allow advisers to go beyond data to offer knowledge, understanding, and insight. In a competitive landscape, this ought to be welcome news to advisers seeking to distinguish themselves on the basis of their investment acumen.


Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

About the Author(s)
Bob Dannhauser, CFA

Bob Dannhauser, CFA, is head of global private wealth management at CFA Institute.

3 thoughts on “Talk Your Walk: Client Reporting in a Goals-Based Framework”

  1. Truly said, as a client, i don’t care whether you met benchmark, over performed or under performed, all i care if whether my goal was met or not. if that’s not the case, event the best of managers would fail.

  2. Riley Lee says:

    Unfortunately, their reports lag far behind the industry.

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