UHNW reporting structures are not linear constructs. To correctly map the connections you have to think 3 dimensionally. The ideal candidates for architecting these structures are designers, because they process high level relationships and physical details simultaneously. For example, when a designer creates a website they structure the site from the top down. At the same time, they implement the components of the layout from the bottom up.
Top Down - Bottom Up
The End Goal
INVESTMENTS are liquid assets, hedge funds, private equity, vehicles, real estate or other instruments.
ENTITIES are trusts, LLCs, LLPs, or other legal ownership containers.
BENEFICIARIES are the actual people or organizations to whom the money, equity, tangible posessions or real estate flow.
Organizing entities and investments involves interviewing stakeholders, reviewing descriptive documents and creating a visual map. A visual map helps, because it is always easier for people to respond to a picture. A visual map facilitates gap identification, because the stakeholder can see the structure in one place. No one likes a leaky bucket, and people are more likely to get you the missing information if they identified the hole to begin with. In short, creating a visual map engages stakeholders in the process, and sets you up for successful information organization.
Setting up a concisely structured spread sheet allows you to codify each account, and identify factors such as container, data source, asset type and location in the tree structure. Accounts, portfolios and consolidations are the containers that will hold your assets and transactions, and define parameters like performance. These containers are the buliding blocks of the investment and beneficiary trees in your portfolio accounting system. Make sure to check in with your stake holders during the vetting process to confirm the correct configuration, because the trees you build will be the brick and mortar connection to your visual map.
* Scroll to the end for Account Vetting Tips
Analytics & Reporting
Top Down Bottom Up Benefits
By architecting information from the top down and the bottom up at the same time, you can craft a complex structure in the most efficient manner possible.
By engaging the stakeholders in two types of thinking – birds-eye and ground-level you will find gaps more effectively. Stakeholder’s memories will be triggered by seeing the structure through different lenses. You will glean new data points and insight, so be prepared to revisit the structure during the process.
By soliciting feedback from both relationship managers and operations, everyone will have a stake in ensuring the resulting structure is as accurate as possible.
Account Vetting Tips
Containers are the nested objects that hold investments. The lowest common denominator containers in a double entry ledger system are cash and position accounts. These accounts are housed in portfolios. Multiple portfolios can be grouped together and housed in a consolidation. Consolidations can be infinitely nested, singularly or in groups.
The data source tells you if the transaction is manual, or comes through a feed. For a manual transaction you will need to check if the operations workflow is in place to enter it. If a feed is involved you will need to obtain a lettor of authorization from the client and the custodial account number.
The asset type defines how an asset is structured and how the transactions will be processed. For instance, in the case of private equity you need to know if the asset is a fund, or a direct investment because each of those asset types is structured differently, and have slightly different transaction profiles.