The Stewardship of Wealth: Successful Private Wealth Management for Investors and Their Advisors, + Website

Performance Monitoring

Family investors may be receiving performance reports from a variety of sources. Money managers send reports to their clients, bank custodians send reports, and if the family has retained an overall advisor, such as an investment consultant, that advisor will also be sending reports. With so many sources of information about performance, we might imagine that most investors do a good job of monitoring investment performance. But nothing could be further from the truth. The source of the failure lies in the complexity of performance reports, in the differing kinds of reports we receive, and in the inability of many of us to interpret the reports appropriately.

Money Manager Reports

All money managers send account reports to their clients, but that's about all that can be said. Some managers send monthly reports, some send quarterly reports, some (especially alternative asset managers) send only annual reports. However frequently or infrequently they send out reports, some managers show only account balances, while others show performance for that period, and some show performance as well for prior periods. Among those managers who show performance, some compare that performance against appropriate benchmarks and some do not. Among those who show performance against benchmarks, some managers use consistent measuring periods and some do not.¹ Finally, managers report only on their own performance, not the performance of other managers, so families who rely only ...