Business Tools For Managing Wealth Long Presentation-1213

Business Tools For Managing Wealth

December 2013

The Importance Of Good Reporting

Why Is Good Reporting Important?

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• Provides an accurate assessment of the management of a family’s investment portfolio and other holdings

• Enables transparency, responsibility and accountability

• Establishes a culture of informed decision-making

• Wealth owners are informed of financial successes, challenges and impending problems so that they can adjust accordingly

• Ensures that client’s wealth is serving their family members’ needs, priorities and values


How Is Good Reporting Achieved?

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• Starts with a commitment to embrace a system that captures, processes and communicates investment performance and financial results

• Accomplished with a system that is comprehensive and integrated with other disciplines such as:• Investment and cash flow management• Tax planning• Liability and risk management• Multi-generational estate planning and wealth transfer• Family governance• Wealth management education, philanthropy and

service


Building A Good Reporting System

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• Must identify the financial activities AND the transactions necessary to create financial reports

• Examine, organize and validate the DATA underlying financial transactions

• Assess the information needs of EACH end-user

• ONLY THEN, can one design, select and implement the best solution(s) for information gathering and delivery

Identifying Financial Activities

Investment Cycle

Pooled Fund

Investments

Financial Activities Of A Family Office Capital

Asset Cycle

Expense Cycle

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Managed or Self-

Directed Accounts

Other Investments

Residences Equipment

Financings

Non-Investment

Personal Assets

Staff Expenses

Household Expenses

Other Operating Expenses

Identifying Financial Transactions

Capital Invested

Capital Withdrawn

Money Market FundsMutual FundsHedge FundsPrivate Equity FundsVenture Capital FundsReal Estate Funds

EquitiesFixed IncomeFuturesCommodities

Direct LoansDirect Equity

Financial Transactions Created In The Investment Cycle

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Investment Cycle

Pooled Fund

Investments

Managed or Self-

Directed Accounts

Other Investments

Investment Income and

Expense

Cash & Financing Activity

Balances, P&L and Returns Tax Data

Financial Transactions Of A Family Office

Identifying Financial Transactions, Continued

Financial Transactions Created In The

Capital Asset Cycle

Financial Transactions Created In The Expense

Cycle

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Capital Asset Cycle

Expense Cycle

Residences Equipment

Financings

Non-Investment

Personal Assets

Staff Expenses

Household Expenses

Other Operating Expenses

Acquisitions &

Dispositions

Construction In Process

Cash & Financing Activity

Appraisal Check Disbursements

Wire Transfers

Cash & Check Receipts

Financial Transactions Of A Family Office

Information Needs Assessment

Family Members and Inside Advisors:

Senior Wealth Owners

Wealth Planner and Family Office COO/CFO

Outside Advisors:

Investment Manager(s)

Tax Accountants

Trust & Estate Attorneys

Net Assets & Investment

Income

Investment Performance Spending Tax Basis

Detail

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Income

Spending Report

Investment Performance

Tax Basis Detail


IncomeSpending Tax Basis

Detail

Tax Basis Detail


Income

What Information Is Needed?

Creating Reports For Managing Wealth, Continued

What Reports Are Needed?

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• Every family is different!

• The type of investment assets and other holdings and the way they are managed influences reporting needs (e.g.., degree of hedge funds, private equity, commodities; one or multiple investment advisors/custodians; multiple homes/domiciles)

• Minimum information requirements:• Consolidated investment performance and financial reporting• Expense reporting • Tax basis reporting


Consolidated Statement of Net Assets And Investment

Income

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A comprehensive business tool that allows users to:

• Assess liquidity of all holdings as of month end

• Review current value and rates of return earned on specific investment assets

• Reassess illiquid and non-performing assets for changes in circumstances that might warrant a change in valuation or other action

• Review unrealized gains and losses to determine if they can potentially be used to offset realized gains and losses for income tax purposes


Consolidated Statement Of Net Assets

And Investment Income

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View assets, liabilities and earnings in a simple to understand report that consolidates all holdings regardless of the legal entity where they reside.




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Review the detail behind each holdings category.




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Tax basis cost, current market value, unrealized gains and losses and realized gains and losses to assist in tax planning.




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Prior year and prior month values for comparative purposes.


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Consolidated Statement Of Investment Performance

• Report is often created by the investment advisor(s)

• Where there are multiple investment advisors information needs to be consolidated to provide an accurate measure of results

• Used to determine how each asset class of investments is performing relative to an appropriate, user-defined index

• Determine which asset classes are adding value and which are not

• Determine whether or not entire portfolio is performing as it should


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Consolidated Statement Of Investment Performance

User-defined benchmarks and return periods help measure and understand performance.


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Household Spending Report

• Review household and related expenditures in an easily understandable format

• Highlight relevant spending activities within specific user- defined spending categories and cost centers

• User-defined reporting periods so that meaningful action where necessary, can take place on a timely basis


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Household Spending Report

User-defined spending categories, cost centers and reporting periods help control expenses.


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Tax Basis Detail

• Needed for “Alternative Investments” since most brokers track public securities

• Keep track of all tax related events reported on Form K-1 during the life of an investment

• Keep track of the tax cost basis of all investments so that potential sales or dispositions can be reviewed and determined for optimal timing


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Tax Basis Detail

2000 - 120 - 1 1 - - - - - (10) - (8) 112 3 - 3 3 115

2001 115 150 - 4 3 (4) 1 (3) 0 - (21) - (17) 245 6 - 6 9 254

2002 254 100 - 1 2 (1) (4) (5) (9) - (24) - (34) 311 (22) - (22) (14) 297

2003 297 100 - 3 1 3 3 6 0 - (23) (1) (13) 398 (17) - (17) (31) 367

2004 367 50 - 3 3 7 34 41 10 - (20) (9) 27 475 135 - 135 105 579

2005 579 60 (101) 3 6 2 123 125 3 - (2) (7) 127 561 (38) - (38) 66 627

2006 627 60 (118) 3 9 1 145 146 (2) (3) 87 (16) 223 726 3 - 3 70 796

2007 796 46 (282) 3 12 1 125 126 23 (4) (21) - 138 628 (9) - (9) 61 689

2008 689 14 (72) 3 5 (0) 33 33 11 (5) (19) - 28 598 (169) - (169) (109) 490

2009 490 16 (32) 2 8 1 11 12 1 (5) (14) (3) 0 582 41 - 41 (68) 515

2010 515 26 (147) 1 17 0 34 34 (0) (5) (14) - 33 494 27 - 27 (41) 453

2011 453

End Capital

Account

SAMPLE Family Holdings Tax Basis Detail

Taxable Income

(Loss)

MEMO Tax

Basis Cost

Timing Diffs

Perm Diffs

Total Timing &

Perm Diffs

MEMO Cumulative

Timing & Perm Diffs

LTCG(L)

Net Capital

Gain (Loss)

Other Inc

(Loss) Inv Int

Exp Other

Deducts

Foreign Taxes Paid

Tax Year

STCG(L)

Beg Capital

AccountCapital Contrib

Capital W/D Or Distrib Int Inc Div Inc

Keep track of relevant tax information throughout the life of an investment.

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Connecting The Pieces Together

Managed or Self-Directed

Accounts

Pooled Fund and Other

Investments

Financial transactions received electronically recorded* when activity reported

Financial transactions recorded* when - cash received - cash disbursed - returns reported

Capital Assets and Expenses

Financial transactions recorded* when - cash received - cash disbursed

Family’s Books

of Account

General Ledger

Reconcile and

Review

* manually or via posting tool that converts data into format readable by General Ledger software

YOUR Third Party

Investment Managers,

Brokers, Custodians,

Direct Investees and

Borrowers

YOUR Third Party Vendors,

Employees, and Others

User Reports

Overview Of The Process

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Limited Review

Proposal Examine, Organize and Validate Data

Assess Informational Needs

Design, Select and Implement Solution(s)

Educate

CommitmentA Comprehensive

Financial/Investment Performance

Reporting System

Overview Of The Process

Adding Value

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Adding Value

• Achieve asset optimization more easily when timely and relevant information is routinely available

• Reduce compliance costs and control household spending more effectively

• Create legacy of accountability, financial responsibility and informed decision-making in each family unit

• Increase confidence from tightened system of checks and balances and regular review of financial assets and liabilities

Credentials And Professional Experience

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Glenn P. SchwartzBroad Professional Experience Over 38 Years:

• 35 years as a Certified Public Accountant, 13 working in public accounting, specializing in trading and investment company audits

• 17 years working with investment partnerships, hedge funds and proprietary trading firms, specializing in finance, operations and systems development

• 8 years as a CFO and independent consultant to several prominent families / family offices: • working with direct business investments, private

equity, hedge funds and other alternative investments

Credentials And Professional Experience, Continued

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Glenn P. SchwartzPresent And Past Affiliations:

• Present• Member, American Institute of Certified Public

Accountants and Illinois CPA Society

• Past• NASD Series 27-Financial and Operations Principal• NASD Series 24-General Securities Principal• NASD Series 7- Registered Representative• NASD Series 3- Commodity Futures

Contact Us

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For additional information on how we can be of service to you please contact:

Glenn P. SchwartzWealth Management Partners191 N. Wacker DriveSuite 2300Chicago, IL 60606www.wealthmgmtpartners.com

REFERENCES AVAILABLE ON A CONFIDENTIAL BASIS

P: (312) 602-1252E: [email protected]

Documents

Business Tools For Managing Wealth Long Presentation-1213