Consolidated Reporting: Leaving Excel Behind
For many family offices, Excel has been the go-to tool for creating consolidated reports due to its customization, accessibility, and cost-effectiveness. However, as the complexity of investment portfolios grows, family offices often encounter challenges related to data integrity, analytics, and scalability. Excel’s limitations become apparent when dealing with large datasets or non-traditional assets like real estate, private equity, art, impact investments, and cryptocurrency. As a result, family offices begin to seek more scalable solutions that can handle diverse assets and provide comprehensive consolidated reporting. In this blog post, we will explore the concept of consolidated reporting, its significance, the hurdles faced when using Excel, and the attributes of a robust consolidated reporting system.
What is Consolidated Reporting?
Consolidated reporting refers to the process of combining data from various sources and presenting a holistic view of an investor’s holdings and financial information. It offers a comprehensive overview of liquid and illiquid assets, including traditional investments such as public markets and non-traditional assets like real estate and private equity. By aggregating and analyzing data from diverse sources, consolidated reporting allows investment managers to gain valuable insights into their overall financial health and investment performance.
Why is Consolidated Reporting Important?
Consolidated reporting is vital for family offices because it provides a clear and complete picture of their financial landscape. By having all investment data in one centralized location, decision-makers can make informed choices, identify trends, and assess the performance of their portfolios. This comprehensive view enables wealthy investors to align their investments with their long-term goals and make strategic financial decisions.
Why is Consolidated Reporting Hard to Do?
Using Excel to generate consolidated reports might be feasible in the early stages of a family office’s growth. However, as the complexity of investments increases, Excel’s limitations become apparent. Excel struggles to handle large datasets efficiently, and formatting data for specific calculations can be cumbersome. Moreover, human errors can easily occur in Excel, making it challenging to catch mistakes compared to other reporting methods.
Attributes of Good Consolidated Reporting:
- Digest Data from Disparate Sources: An effective consolidated reporting system should be capable of handling various types of assets, including both liquid and illiquid investments, real estate, private equity, and alternative holdings like art, collectibles, and cryptocurrency.
- Accessible in a Customized Way: Each client should have access to a personalized dashboard where reports are presented according to their preferences and specific investment needs.
- Performance Reporting and Benchmarking: The system should allow for the customization of benchmarks and asset classes to suit each client’s unique investment objectives, rather than relying on standard categories.
- Scalable and Cost-Effective: A good consolidated reporting solution should be scalable to accommodate the family office’s growing needs. By streamlining data entry and report generation, it frees up resources for higher-value tasks.
- Portable for Intergenerational Wealth Transfer: The reporting system should support seamless data transfer and accessibility, facilitating the smooth transfer of wealth between generations.
Why Should Investors Avoid Relying on Custodian & Brokerage Reports?
Relying solely on performance reports from custodians and brokers proves inadequate for family offices due to several critical shortcomings. The primary reason is that custodians and brokerages offer limited consolidated reporting services that fail to encompass the entirety of a family office’s investment landscape. This limitation stems from the diverse nature of assets that high net worth investors, many of which are privately held.
The inherent flaw lies in the fact that custodians and brokers primarily focus on traditional, liquid assets such as publicly traded stocks, bonds, and mutual funds. These assets are easily managed and traded through conventional brokerage platforms. Consequently, custodians and brokers can efficiently generate performance reports for these standard investments, providing essential information on their market values, returns, and transaction histories.
Wealthy Investors: Diverse Portfolios
However, the investment portfolios of most wealthy investors extend far beyond traditional assets. Family offices often venture into more complex and diversified investments, including directly held real estate properties, various private equity funds, impact investments using charitable foundations, and family-owned businesses. Additionally, family offices may hold alternative assets like art, collectibles, and cryptocurrency, which further complicate the reporting process.
Unfortunately, these non-traditional assets often fall outside the purview of custodians and brokers. As a result, the performance reports provided by these institutions lack a comprehensive overview of the family office’s entire investment holdings. The absence of critical data related to real estate properties, private equity investments, and other non-standard assets hinders the family office’s ability to obtain a complete picture of their financial performance.
Moreover, reporting on non-traditional assets necessitates more intricate and specialized methodologies, as their valuations and market movements may not be as readily available from publicly traded sources. The complexities involved in consolidating data from various sources and asset classes exceed the capabilities of standard custodian and brokerage reporting systems.
Consequently, family offices require a more robust and sophisticated consolidated reporting solution that can aggregate data from multiple sources, including custodians and brokers, as well as other alternative investments. Implementing advanced family office software that can handle diverse assets and integrate data from non-standard account types becomes imperative to bridge the gap left by custodian and brokerage performance reports.
Finding Software Solutions: Better Than Excel
Consolidated reporting is a crucial aspect of effective wealth management for family offices. While Excel might serve as a starting point, the limitations it presents make it less viable as portfolios grow more complex. Family offices need scalable solutions that can handle diverse assets, provide customized reporting, and offer performance insights. By embracing modern consolidated reporting systems, family offices can streamline their operations, make informed decisions, and focus on achieving their long-term financial objectives. Leaving Excel behind, they can move towards a more efficient and comprehensive approach to managing their wealth.
How Can Our Family Office Help You?
In the fast-paced world of wealth management, family offices play a crucial role in overseeing the intricate financial affairs of high net worth individuals. As investment portfolios become more complex and diverse, the need for accurate and comprehensive consolidated reporting becomes paramount. This blog post has shed light on the significance of consolidated reporting for family offices, its challenges when relying on Excel, and the attributes of an efficient consolidated reporting system.
Markdale Financial Management emerges as an invaluable ally in helping clients implement scalable consolidated reporting solutions and leave Excel behind. As a family office serving wealthy investors, Markdale Financial Management possesses an in-depth understanding of the unique obstacles faced by our clients. With this expertise, we can seamlessly integrate consolidated reporting software used by wealthy investors, providing them with a holistic view of their investment holdings and financial performance.
Leave Excel Behind?
Excel, while initially useful for creating consolidated reports, becomes cumbersome as investment portfolios grow in complexity. The limitations of Excel become evident when handling large datasets or non-traditional assets like real estate, private equity, art, collectibles, and cryptocurrency. Markdale Financial Management recognizes the importance of scalable solutions that can handle diverse assets and provide customized reporting. By embracing advanced family office software, we enable wealthy investors to make informed decisions, and align their investments with long-term goals.
Moreover, the attributes of a robust consolidated reporting system, as discussed in this blog post, align closely with Markdale Financial Management’s approach. Our commitment to providing accessible and customized reporting ensures that each client receives relevant information presented in the format they prefer. Additionally, our expertise in performance reporting and benchmarking our clients to assess investment success against personalized benchmarks, offering deeper insights into portfolio performance.
By partnering with Markdale Financial Management, family offices can efficiently navigate the complexities of consolidated reporting. Markdale’s expertise in data integration, customization, client access, and error correction streamlines the implementation process, making it easier for clients to harness the benefits of consolidated reporting software. Clients can confidently rely on Markdale Financial Management’s knowledge and support to optimize the capabilities of the software, identify trends, and make more informed investment decisions.
To find out more about how we can help you implement a consolidated reporting software to your investment portfolio, please click this link to contact us.