There are many forms of risk within a portfolio, and each can affect a client in multiple ways. We monitor risks and help our clients make better, more informed decisions based on a broad understanding of the many different ways to measure and view risks and impacts.
Given the inherent complexity of most portfolios today, these risk and transparency reports are an internal tool to help clients understand the assets they own, how the assets relate to each other, and how decisions and changes made to portfolios may influence future results. This can be done in a variety of ways, including Monte Carlo simulation and stress and scenario testing of various asset classes and portfolio mixes. Risk is often measured as a form of drawdown or potential change in the portfolio during times of market stress. While this is one form of risk worth measuring, it is perhaps not as important as the impact those changes will have on the organization or family, and their ability to meet financial needs and required annual spending. We lead our clients through various analyses and conversations around how to measure not only the risks explicitly within the portfolio and investment strategy, but also how the myriad of those risks, some emotional and some financial, affect the client’s everyday needs going forward.
Our clients receive regular reports to provide transparency on the different layers of risk. These reports include portfolio stress tests, liquidity reports, investment manager profiles, and asset class exposure reports.