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December 01, 2007 at 02:00 AM
In more than 15 years as a financial advisor, I have often acted as a “Personal CFO” for families. This means advising on virtually all assets, regardless of where they are held. Ideally, for optimal portfolio oversight, we need to accurately account for outside assets such as 401(k) plans or alternative investments such as hedge funds.
One of my priorities in becoming a fully independent RIA was to find the best method of aggregating and monitoring a client’s complete balance sheet, regardless of where the assets are being held. You could call it a search for the Holy Grail of efficient asset management.
I spent considerable time meeting with IT vendors of all shapes and sizes to see just how to make this work. As we all know, no two clients have identical profiles, so there was no chance of finding a cookie-cutter solution. An ideal solution had to be customized to reflect each client’s biases, constraints, risk tolerances, and cash flow needs. Reporting, aggregating, and oversight demands required a system that clients could readily understand and, therefore, use to great effect in planning and decision-making. This would certainly empower me to help direct capital allocation on a much broader basis.
Perhaps this will all seem familiar to many advisors, but how can it actually be achieved without spending a fortune? Well, there are two essential components to the solution.
First, you need a portfolio management tool able to track all investment assets; second, a dynamic spreadsheet to monitor and report the performance of each component of the balance sheet. This spreadsheet should also be used as a report card to monitor performance against goals.
The challenge is how to integrate these two main components. That requires original thought and programming. Ultimately, however, I can promise you that all the sweat and investment is worth it.
Using a homegrown tool that I call “My SAM,” after the name of my firm, clients can access their portfolios 24/7 to view an integrated report on the assets I oversee and those held away, such as 401(k), 403(b), and 529 plans; deferred compensation; stock options; cash value insurance policies; bank accounts; and even hedge funds and private equity holdings.
