Performance Perspectives Blog

A client reporting “no no”

by | Aug 30, 2010

It appears at times that reports are designed to convey how smart the sender is. And while this is perhaps not normally the intent, it can nevertheless be the message. Sending a client, for example, the results of a complicated fixed income attribution model, when we haven’t conveyed in a clearly understandable manner the meaning of what’s shown, serves no purpose.

Even sending what many might consider basic return or risk statistics, when they aren’t necessarily appropriate, would fall into this category. Why, for example, would we send a brokerage client tracking error? Tracking error, if you recall, is the standard deviation of the excess return, which in turn is the portfolio return minus the benchmark. It basically tells us how closely our portfolio has tracked the index. But why would a retail client care about this? Are they managing their portfolio vis-a-vis an index? Okay, if they are then fine, send them tracking error. But if they’re a fairly normal (whatever that means) brokerage account, why give them this statistic? It may confuse them but will most likely not enlighten them.

Let’s not get carried away with our reporting. Just because we can send a client something doesn’t mean we should.

Free Subscription!

The Journal of Performance Measurement

The Performance Measurement Resource.

Click to Subscribe