How Web-Based Dashboards for Private Asset Portfolio Management Can Improve Performance
You would be surprised how many Family Offices, investors, and Registered Investment Advisors (RIAs) don’t spend any time or effort collecting and reporting on the performance of their private assets. Those that attempt to, find collecting performance information on their private assets to be orders of magnitude more difficult than collecting and reporting on the performance of their public asset investments. In a perfect world, private investment information would be available and easily accessible, but it’s not.
If these groups begin the uncommon journey of collecting, analyzing, and reporting on their private asset performance, they face continual roadblocks that often result in most turning back. A consistent roadblock in collecting information is that the summary or detailed level of information is contained in various software applications or paper copies. Depending on the size and sophistication of an organization, this could range from different modules within an Enterprise Resource Planning (ERP) system like SAP, common bookkeeping software, Microsoft Excel, or a paper copy of a yearly investment report. Given this lack of uniformity, collecting, validating, and compiling private asset performance information is daunting. As a result, the final performance reporting, if there is any, is half complete and provides little actionable value.
The challenge isn’t only collecting the information, but also identifying what information is required for their needs in the first place. To know this, you must first understand what Key Performance Indicators (KPIs) or other metrics are needed to measure and track performance. It’s common to see different performance metrics being used between one private asset investor to the next, and, again, many aren’t using them at all.
These metrics would include overall financial performance KPIs, such as Gross and Net Profit Margin, to more industry-specific KPIs, such as Gross Monthly Recurring Revenue (MRR) Churn Rate commonly used in the Software as a Service (SaaS) industry. Tracking and reporting these critical KPIs gives investors confidence the asset administrators are managing the key levers that will create the most value and return on their private asset investments. However, even with the value of having up-to-date, accurate, and actionable data on the performance of their private asset is easy to explain and understand, why are most not doing it?
While it isn’t easy to answer the question as to why Family Offices, investors and RIAs aren’t tracking their private asset performance, we found it commonly comes down to five reasons:
- Limited Information Available: Private asset investment managers may not have the sophistication or the internal resources needed to provide the level of information required.
- No Motivation to Change: Private investors and private investment managers haven’t tracked the performance of their private assets to this level in the past, and it seemed to work out.
- No Standard Operating Procedure (SOP): Private investors don’t have an easy-to-follow and validated SOP to collect, analyze and report on their private assets performance.
- Lack of Private Asset Valuation Expertise: Even with the information needed to evaluate the performance of a private asset, it isn’t much use if you can’t use it to accurately value the private asset.
- Limited Internal Capacity: If there is an SOP in place, there is limited time and human resources available to follow the SOP.
When Family Offices, Investors, and Registered Investment Advisors (RIAs) know they need to invest in collecting, normalizing, and tracking the performance of their private assets, the first tool they naturally think of to help with this is Microsoft Excel.
Don’t Use Microsoft Excel to Track and Measure Private Asset Performance
The cost to subscribe to Microsoft Excel is low, and it’s taught at nearly every level of our education system. As a result, businesses see Excel as the go-to software application to organize and manage not only financial performance but other important areas of their business. It isn’t long before those managing their business activities in Excel begin to see some of the major flaws in using the application when software would result in better outcomes.
For private asset performance management specifically, Excel isn’t configured to communicate the value of the private assets in the portfolio. While it is technically feasible, a reporting structure would need to be created from scratch to show private asset performance information that can be compared to the performance of public securities in a portfolio.
In addition to the examples given above, there are other important drawbacks and limitations of using Excel to manage private asset performance that is worth noting below.
Prone to Errors
An Excel spreadsheet is prone to both human and technical errors. Manually updating an Excel spreadsheet or workbook each reporting period opens the door to data input errors or incorrect formulas that produce incorrect results. At best, these human errors cost time to first find and then fix. At worst, they give false results that are reported and result in poor decisions.
Version and Quality Control
There can be multiple versions of the same Excel spreadsheet being used by different users throughout the business. At the end of the day, with so many individuals and groups within a company using the file, version and quality control is difficult to manage.
Microsoft Excel doesn’t have automated functions that allow you automatically send requests for information, or report information automatically. Users need to manually reach out to owners of the required data, and once the data is input and reports created, they need to manually insert the information into an email or a report to be issued.
A Better Way To Manage the Performance of Private Assets
FinStrat Management saw a need for a better way to collect, normalize, and report on private asset performance.
What are Web-based Dashboards
Business intelligence dashboards have been around for a long time and are in common use across all industries. Over the last 15 years, they have been primarily available through either computer-based software or web-based software. Computer-based dashboards are available for individual computers with individual or corporate licenses. Web-based dashboards are accessible with desktops, laptops, tablets, and smartphones with access to the internet.
When software companies started offering web-based applications, it was traditionally offered alongside computer or desktop software. A common example of this is QuickBooks Online and QuickBooks Desktop. Gradually, the use of web-based versions of software, also known as Software as a Service (SaaS), became the most commonly used for a number of reasons that are reviewed below. In fact, 70% of current business software in use is web-based.
Advantages of Web-based Dashboards to Track Private Asset Performance
Let’s review some of the main benefits of web-based software and counter some of the existing misconceptions.
Accessible Anywhere with the Internet
With web-based software applications, users can access the software using devices such as smartphones, tablets, laptops, and desktops as long as they have access to the internet. When you need information or data, you can simply log in and get the information you need. Gone are the days when you would save information on a single desktop computer hard drive, which was the single source and repository for the information.
With information shared on the cloud, collaboration on tasks and projects is much easier, with each user able to access the information they need, when they need it. Sharing information is as easy as sharing a link. In the past, sharing information was commonly done through email, often third-party email providers. This was and continues to be a poor and unsafe way to share information. Thankfully, with web-based software, there is little to no need to do this.
A common misconception, especially in the early years, was that web-based software applications weren’t as secure as their Personal Computer (PC) alternative. In fact, web-based applications are much more secure overall than their PC alternative. Web-based applications are installed on secured web-based servers that are managed by information technology professionals who know how to ensure safe control of the information. Compare this to software and information being held on many PCs in multiple locations. Often, sensitive information isn’t removed from these computers when replaced or sold, and private information inadvertently becomes public.
Web-based Dashboards Using Leading Wealth Management Platforms, Enable Better Decision-Making
The three leading wealth Management software platforms are Addapar, Black Diamond, and Tamarac. These web-based software platforms have traditionally been used to track and report on the performance of publicly traded securities. However, these platforms can also be used to track and report on private investment performance. In a perfect world, you can use one of these software platforms to review the performance of your publicly traded securities and your private investments. However, as this article has noted, there is a knowledge, process, and internal capacity gap that prevents private investors from utilizing web-based dashboards to report on the private assets in their portfolios. This is the gap the FinStrat Management team bridges for our clients so they can have a holistic view of their investment portfolio, including private investments.
Working with these three leading wealth Management software platforms, FinStrat Management has developed a web-based Dashboard to track and report on critical metrics to manage the performance of your private assets. Book a quick exploratory call with FinStrat today to learn how we can help you get more value out of your private assets.