Spotlight on BDO’s Portfolio Aggregation and Exposure Reporting Capabilities

For many investors, it can be difficult to understand how all the pieces of an investment portfolio fit together. This can be especially true for investors with complex portfolios featuring allocations to many external managers, including exposure to private asset classes such as private equity and real estate. Without a clear, easy-to-understand view of your portfolio, it can be hard to truly understand whether you are on pace to achieve your overall financial goals.
 
BDO Wealth Advisors’ portfolio aggregation and exposure reporting services address these challenges by providing a comprehensive, centralized view of how our clients’ wealth is invested. By aggregating portfolio data and providing reporting that is easy to comprehend, we help our clients analyze and assess their investments, monitor and evaluate underlying investment managers, and seek opportunities to invest in ways that are more closely aligned with their long-term goals.

 

What is portfolio aggregation? How does it work?

In a nutshell, portfolio aggregation is our way of pulling all of a client’s investment information into one central location. This allows us to provide more helpful, detailed portfolio reporting that can be used to make better-informed investment and financial decisions.
 
BDO Wealth Advisors has a team of professionals who are dedicated to our portfolio aggregation and reporting services. We begin the process by developing an understanding of the client’s goals. Then, we gather the required portfolio data and information from our clients. We pull portfolio data across all accounts, many of which can be linked to directly, while others — including private investment accounts such as private equity and real estate — must be manually entered and updated. While collecting this information, BDO seeks to understand the goals and objectives of each investment and begins to formulate the client’s initial package of reports.
 
Once we onboard a client, the portfolio aggregation tool is automatically updated in real-time. Clients receive online access through BDO’s secure client portal so they can review the latest information on their portfolio whenever is convenient for them.
 
Our portfolio aggregation clients receive:

1. Reporting on sub-asset class, sector, and specific security exposure

2. Consolidated portfolio accounting and performance tracking

3. Online access to daily consolidated account balances

4. Transparency into overall risk exposures and concentrations

5. Analysis of individual manager performance

 

How portfolio aggregation may benefit your portfolio exposure

Many of our portfolio aggregation clients have very complex portfolios with many underlying managers. One of the greatest potential benefits of this service is that we may be able to identify ways to improve the portfolio, limit overlapping portfolio exposure, and clarify each underlying manager’s goals and investment objectives.
 
A few common portfolio issues that may be uncovered in the portfolio aggregation process include:

• Geographic concentration: Many U.S. investors are unknowingly over-exposed to U.S. equities — a phenomenon known as “home country bias.” In recent years, this generally has worked out well due to the strong performance of U.S. equities, but there is no guarantee that domestic stocks will continue to outperform going forward. For many investors, it may be valuable to consider a more globally diversified approach. Our portfolio aggregation service shows an investor’s geographic diversification across all equity positions and managers, helping investors to better understand where their investments are concentrated.

• Credit and interest rate risk: In fixed income, our portfolio aggregation reports provide information about overall exposure to interest rate risk and credit risk. Given the current low interest rate environment, some fixed income managers and investors may be seeking greater yield by shifting money into funds that target longer-maturity bonds or increasing exposure to lower-quality issuers. This may be appropriate for some investors based on their time horizon and risk preferences, but it could present an uncomfortable level of risk for others. In addition to analyzing fixed income investments, we also analyze cash positions and help clients to reflect on their need for liquidity relative to the opportunity cost of holding too much cash.

• Style and sector exposure: Our initial analysis may reveal that a client has larger-than-expected portfolio exposure to certain sectors (e.g., technology), styles (e.g., growth or value), investment themes, or individual stocks. Clients may discover that they aren’t as diversified as they previously thought because owning a large number of funds doesn’t necessarily lead to ample diversification. For example, many funds that invest in growth stocks have become technology-heavy in recent years because of the sector’s strong performance; this is true for both passive index funds and actively managed funds. As a result, investors may have a much greater exposure to the technology sector than they previously realized.

 
Additional benefits of our portfolio aggregation services include:

• Fee transparency: We centralize fee information from underlying managers and funds in the client’s portfolio, helping clients to gain a clearer understanding of the fees they are paying to managers — as well as whether such fees are justified based on each manager’s performance. In some cases, we have direct conversations with managers on our client’s behalf to clarify fees and seek improvements if possible.

• Tax-aware investing: Having a clearer understanding of the total portfolio helps our advisors to assist clients with the execution of tax-efficient investment strategies, such as tax-loss harvesting. We often play the role of quarterback for our clients, working with underlying managers and other service providers to execute tax-efficient strategies.

 

Simplify your portfolio… and your financial life

If your portfolio is allocated to numerous managers across varying asset classes and you are having trouble making sense of it all, BDO Wealth Advisors can help. To learn more about our portfolio aggregation and exposure reporting services, contact your BDO advisor today.

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