Focus on Best Practices:
Consolidated Financial Reporting

One of the least sexy aspects of managing your family’s financial affairs is pulling together periodic financial reporting.

Through the years, wealthy families amass a complex web of assets and investments that range from angel investments to life insurance, private equity funds to vacation properties.

Keeping track of your family’s investments becomes increasingly important as your family grows and especially as the oldest generation ages. It is challenging to remember and document important details, even simple numbers such as cost basis, for long-lived investments.

For Conifer Bay Capital, one key measure of a family’s ability to successfully transfer wealth from generation to generation is the ability to efficiently consolidate financial reporting and document past investments. These require discipline and consistency from year to year.

Fortunately, financial reporting is becoming easier every year. Why?

Master Custodians. Whether your family is a customer of the elite Northern Trust or the more pedestrian Charles Schwab, financial institutions increasingly custody assets for many different investment managers. Gone are the days when each manager used a different bank. Today, institutions and individuals select one firm to hold all the assets. Centralizing the custody is a benefit for having a single point of contact for money movement and for collecting annual income tax information.

Technology. Keeping all your accounts in one location is unlikely if you hold traditional investments plus retirement assets, life insurance, 529 plans, checking and credit card accounts, and donor advised funds. Software from companies like ByAllAccounts (a subsidiary of Morningstar) have developed solutions to address these complexities.

While you still may have a Chase credit card, an Illinois Bright Start College Savings Plan, an employer 401k or profit sharing plan, technology exists that pulls these balances into one location for consolidated reporting.

Digitization. Many investors eventually accumulate private investments along with the corresponding marketing materials, subscription agreements, annual reports, capital calls and letters from the general partners. While home filing cabinets can become overloaded, digital storage can help keep you organized. Keep a separate digital folder for each asset, with a sub-folder for original documents and additional folders for each calendar year’s reports. This will help you and your heirs find information quickly in the future.

Reporting Systems. If your investments are simple, Excel spreadsheets can be a great tool to track one or two private partnerships like hedge funds, real estate, and private equity. As the number of your investments grows, tracking commitments, capital calls, and returns can become overwhelming. Solutions for this problem exist.

Conifer Bay Capital relies on a system called Black Diamond, which enables us to manually track private investments for clients. We are not alone in having this capability, but not every firm encourages clients to use it.

Make consolidated investment reporting one of your goals for 2020. You may find the benefits are quite valuable to you and your heirs.