A family’s most common question to its family office is simple: how much do we have, where is it and how has it developed? The answer rarely is. Wealth sits with several custodians, in companies, foundations and trusts, in real estate and private markets, in different currencies. Consolidated reporting brings it together, and its quality decides whether the family trusts it.
Data sources
Bank custody accounts supply holdings and transactions, as files or via interfaces depending on the bank. Private market investments come via quarterly fund reports with capital calls and distributions. Real estate, stakes in family businesses, art or intra-family loans are usually recorded and valued manually. Each source has its own rhythm and delay; a report must say openly which position reflects which date.
Reconcile before analysing
Before a report says anything, the data must match the sources. Reconciliation matches holdings and transactions with custodian statements and resolves differences. Without this step, even the best analysis calculates with wrong numbers.
Look-through: through the structures
If a family holds wealth via a holding that in turn owns a stake in a property company, it wants to know what it is economically entitled to. Look-through consolidation allocates wealth proportionally through the structures to family members. The system must know the ownership relationships, including foundations and trusts with their beneficiaries.
Measuring performance correctly
To assess asset managers, time-weighted return is the right metric because it is independent of contributions and withdrawals. For what the family achieved overall, and for private markets, money-weighted return is more meaningful. A good report shows both with a clear method statement, as described under TWR and MWR, plus currency, costs and benchmark.
Where reports go wrong
- Positions with outdated valuations not marked as such.
- Double-counted assets when a company is recorded directly and via a holding.
- Currency conversions at different dates.
- Returns that show contributions and withdrawals as gains or losses.
- Manual spreadsheets whose formulas nobody checks any more.
From spreadsheets to a system
Many family offices start with spreadsheets and hit limits as soon as several banks, structures and generations are involved. A system linking people, structures, accounts and documents per mandate makes consolidation repeatable and traceable. FLIORE consolidates using the look-through method and keeps structures with their KYC documents in one place. How to choose a suitable solution is described in our article on selecting family office software.