Performance reporting is dead… a repeat of my 2014 message

In April 2014, I sent this article below to 2 major magazines in our industry. Both were shocked, reviewed it thoroughly, confirmed the trend with other sources, and then said they couldn’t publish it. They were afraid of losing two major sponsors, which were investment performance software companies.

We all know that if the pay-to-play model went away for magazines and conferences, most magazines and conferences would die. Advisors aren’t able nor willing to pay the real cost of receiving objective, non-conflicted information. So, instead of asking the magazines to resurface this content, I am publishing this article again with no strings attached. 100% of my earnings come from advisory firms and the consulting I provide to them.

Full Disclosure: I want to show you that our industry hasn’t evolved fast enough. By now, advisors should have demanded that someone produce a client portal that matches these traits below. The client is craving an experience and so am I.

Traits of a great client portal

  1. Historical Net Worth statement actively updated through the PFM-aggregation software
  2. Goals and metrics showing progress toward goals
  3. $ amount investment gains/losses year to year and % household-level returns (not asset-level)
  4. Advisor Contact Information that includes: call/appointment scheduler URL link, email address, text #, and phone #
  5. Spending habit information and ability to hypothetically change spending information and see impact on goals
  6. Education on topics such as college, healthcare, estate planning, healthy living, senior care, insurance, and more in the form of advisor-made videos, text articles, and podcasts
  7. New account forms linked to current asset accounts (ie. 401k account has link to IRA Rollover form)
  8. Document area for estate planning and other documents for the purpose of sharing, referencing, and safe-keeping
  9. Communications area that allows advisor and client to communicate requests, homework, etc.

If you agree or disagree with my comments, please voice your opinion by sharing and adding your thoughts. I love respectful banter. And if you want to flashback to 2014 and see how some things haven’t changed that much, read below.





PS. Want to talk? Click HERE. Want to receive my monthly solutions email? Click HERE.

% Performance Reporting is Dead – You just don’t know it yet.

As we roll into 2014, we are seeing a new pivot that we believe is worth noting and learning. The pivot is away from % performance reporting and toward the use of a PFM (Personal Financial Management) system to automatically collect data and report a client’s net worth statement to their email box without effort by the advisor. This pivot is very exciting to follow, especially for wealth managers and planners, as it can add more value to the client relationship and more profits to the advisory owner’s business.

So what is a PFM system? A PFM system is a web-based software that allows prospects and clients to enter their logins and passwords to their bank accounts, mortgages, credit cards, investment accounts and more. The PFM automatically creates a Net Worth statement of assets and liabilities and in some cases, produces an income and expense report that shows a person’s average savings rate. Two of the more widely adopted PFMs are, the free PFM system that has been used for years and was bought by Intuit, and E-Money’s aggregation that has some similarities to the PFM software that is coming out into the marketplace.

So why is this pivot worth noting and taking seriously?
There are great advantages for an advisor to adopt a PFM system and we are seeing them with our advisory firms that have adopted them into their business and servicing. The advantages are:

  1. No compliance hassles: The client or prospect enters their own login credentials so you are not “taking custody” and avoiding the cost of this compliance regulation.
  2. No staff time spent on collecting information for financial plan: The software automatically updates the asset, liability and transaction information and produces a net worth and savings report that can be used to prepare the financial plan
  3. Client serviced more often with high value “touch” at no staff labor cost to you: The software automatically emails the person their Net Worth report to assure them their money is intact and hopefully their net worth is growing
  4. Communications align with the planning focus: Performance reporting operations is the highest cost within a firm after staff compensation. We believe the more you can focus on the growth of the client’s net worth, the less you need to focus on providing a performance report with % return statistics. Some growing advisory firms are not even providing % return reports and their clients


So why do we call this a pivot and not a trend?
We see pivot as something that will revolutionize the industry while trends come and go. This pivot is transitioning from percentage return reports to net worth reports and this is a revolutionary thought. Wealth and planning focused advisory firms are making it their new year’s resolution to let go of old habits. They are acknowledging that there is no compliance requirement to anguish and spend money on preparing questionable percentage return reports. Firms are reviewing their operations hurdles and costs and realizing that performance reporting labor, compliance, software and effort is the most expensive portion of operations beyond staff compensation. They are also acting on the knowledge from client surveys, such as Advisor Impact’s, which tell them that their clients value meaningful conversations far more than performance reports and clients want their advisors to be more accessible.

So before we share more details on this pivot to net worth reporting, let’s cover the pain points of this bad habit: cost, software choices, compliance. Then we will share how it will reduce the work and costs, increase your adherence to compliance, and let you not dread quarterly reporting season. Our hope is that as you read, you will be more apt to shed this old habit or at least consider the possibility of joining the pivot that is about to take place.

The win on cost:
The general cost for performance reporting is 20% or more of overall operating costs. The costs include staff labor, the owner/executive’s time to review the data, reconciliation work, printing, research of index data for benchmarking, collating, mailing or electronically filing reports in client portals, and communications that go along with quarterly reports. Just at a glance, the systems and human labor employed to produce percentage (%) performance reports starts at $20,000 for the smallest firm with very little assets and rises to very high costs. This average cost is low as studies, benchmarks and advisor firm data does not include the cost of distractions and energy consumed by the most expensive people in the firm, the executives. It also doesn’t include the lost opportunity cost of advisors not having time to network with clients and referral sources. The other hidden cost is clients’ confusion over the numbers and how they were derived. Most clients do not understand time weighted or internal rate of return calculations but they do understand a growing net worth ($) number. They also find it much easier to compare the net worth statement to the financial planning report as the numbers will match. The more quickly clients understand the numbers and reports , the quicker they will hear, trust, and act upon the expert guidance. As Riepe, CFP® says “Clients want to be assured that they can live comfortably in retirement, even in bad markets. They don’t really care what new technique or gimmick we’re using this year to invest their money”. So ditch the extra costs and focus on what clients value and need to succeed in reaching their goals.

Technology players:
Now that we established the cost of performance reporting to be very high, we must address the technology that crowds this space. The choices are overwhelming and the tech talk is distracting so we have simplified it to our list of the 6 layers of portfolio percentage (%) performance reporting software:

  1. accounting systems that do the calculation, compilation and report work
  2. aggregation engines that collect and feed in the asset data
  3. index research systems that feed in the index data
  4. product research systems that provide performance reporting on the underlying asset
  5. model-only research systems
  6. portals to communicate the reports to clients and staff

This brief glimpse at the 6 layers makes me love net worth reporting even more and run away from the complexities of tech talk and decisions regarding these layers.

Compliance win:
Finally, there is the 3rd area of perceived pain and that is compliance. The biggest myth is that the SEC or FINRA require performance reporting. Thankfully compliance experts like Ellen Bruno put this myth to rest by sharing that “The Investment Advisors Act of 1940 does not contain any requirement for advisors to report to clients in any way.  SEC regulations do require that advisors ensure that clients receive quarterly statements from custodians, which must include the amount of any fees debited from the account“.  So now that we allowed you to breathe easier and realize you can pivot to net worth reporting, let’s talk about the pivot, tools, and benefits.

Founding players:
The pivot started with, which provided consumers with free net worth reporting, among other features. We also had eMoney, who was visionary and created a system for advisors to use with prospects and clients. Hopefully by now you have experienced the free, end-consumer system called Mint and enjoyed receiving your monthly net worth report via email. Mint was a breakthrough for those interested in managing their finances more easily; however it was not built for advisors. What made this service revolutionary is that it was free, provided easy-to-understand reports, replaced the human labor to produce a savings vs. spending report, and more. If you are like me, you embraced as a huge time saver and stopped tracking and categorizing income and expenses in Quicken to produce your own net worth and savings reports.

New players geared for advisors:
Our industry has now created Mint-like systems and they are being called PFM systems. These systems are providing huge time and money savers to advisors by providing automatic net worth reporting, holding reports, integrations with separate planning software, and automatic alerts to advisors. We will only mention a few of the more developed systems for advisors, not robo advisors, and they are BlueLeaf and Wealth Access. These great PFMs are saving firms money, reducing the workload and eliminating headaches as they allow firms to:

  1.  avoid dealing with the “take custody” rule while still having quick access to all financial accounts
  2. Drastically reduce the time it takes to collect financial statement data
  3. Eliminate the production of net worth and savings reports
  4. Eliminate the need to review the reports for changes as the system sends automatic email alerts for items such as large withdrawals, portfolio pivots and more
  5. Eliminate the need to communicate or send a net worth report to the client as they are sent automatically, if you prefer
  6. Drastically reduce the financial plan preparation as the financial data will flow into planning software
  7. Provide clients with a tool that shares valuable information 24/7
  8. Spend less time preparing reports for client meetings


As a past planner of high wealth and rising middle income clients, I remember the time it took to collect all this data for projection and planning work, yet clients loved the final reports. Now clients will be more than happy to fill in their credentials into a system that provides you the net worth updates and data you need and provides them with a clear snapshot of their rising net worth. And you will enjoy the new found time to sit with clients and prospects, having meaningful conversations instead of crunching numbers, stop the worry about compliance and grind of the reporting season, and pocket the saved money that was spent on performance reporting.

So join the pivot that is rapidly taking place, watch for new software and enhancements to the PFMs, and enjoy this wonderful set of systems that is going to revolutionize our industry, lower costs and compliance, and ad true value to clients.

Please note:  We are agnostic to all product providers and have no revenue sharing arrangements with any product vendor.

PS. Want to talk? Click HERE. Want to receive my monthly solutions email? Click HERE.

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