If you do not use benchmarks or indexes in your performance reporting and are interested in learning about some of their benefits: skip down to the last section of this article or check out the help guides for Benchmark Performance or Performance Chart. If you are interested in understanding the technical details of benchmarks, check out the guide on Benchmark Calculation. If you do not use benchmarks and do not intend to use benchmarks, this guide and its corresponding report will be of limited interest to you (skip to the bottom to see how you may want to use it regardless)
What is included in the numbers you are looking at?
The Consolidated Summary Report is a table display of performance returns for the selected account or household and any assigned benchmarks or indexes for fixed intervals as of the report date. If you do not use benchmarks or indexes, you will only see a single line of the selected account or household displayed as of the report date. In the table you will see the following acronyms which refer to specific intervals:
ITD - Inception to date. Atlas treats an account's Inception Date as the first date for which we have stored data for performance calculation purposes. As a reminder, this may differ from the date Atlas started collecting transaction history if we have history from a conversion or other sources. Note: a household's Inception Date corresponds to the oldest inception date from its constituent accounts.
The Inception to Date exact formula:
gain = ending_period_value - beginning_period_value - cash_flow + outside_income
base = beginning_period_value + weighted_cash_flow
period_return = gain/base***** THis provides the period_return for a day, and would include all days for ITD with this formula below:
((return_day_1 + 1) * (return_day_2 + 1) * (return_day_2 + 1) ... * (return_today +1 )) - 1
MTD - Month to date. Period begins as of the prior month close / current month open.
QTD - Quarter to date. Period begins as of the prior quarter close / current quarter open.
YTD - Year to date. Period begins as of the prior year close / current year open.
3YR, 5YR, 7YR, 10YR (Ann.) - Period begins 3, 5, 7, or 10 year prior report date. Each of these period's return number is annualized, not cumulative. When looking at the these return numbers, note that values, like other date intervals above, will change based on the report date. For example: a report run as of Jan. '18 vs. Jan. '19. For Jan. '18, the 3 year annualized return will take the account return from Jan. '15 through Jan '18 and annualize the return. The 3 year annualized return for Jan. '19 will take the account return from '16 to '19.
The return numbers displayed here use identical calculation methodology to the benchmark and account/household returns displayed in other reports across Atlas. The performance returns calculations have been designed to align with GIPS performance calculation methodology, widely regarded as the highest standard of calculation methodology maintained by the CFA Institute.
Why have we chosen to include and/or calculate the number the way we do?
Atlas includes a wide range of time intervals to support a broad view of the return history, balanced against only the report period selected to not overwhelm the report reader with unnecessary information. This report includes all of the household or account's assigned benchmarks as well for comparison purposes. We use the calculation methodology we do for the following reasons:
Highest standards available for performance numbers
Robust methodology for benchmarks designed to make them as closely aligned to the returns of your client accounts (enabling apples-to-apples comparisons) in addition to normalizing away any idiosyncrasies of benchmark components (e.g. an index like the CPI that only reports once per month)
Improved transparency and context around account returns for you and your client conversations
How can this report be used in a client review to help boost your clients' confidence, increase transparency, and answer questions?
The way you can use this report is primarily driven by whether or not your firm uses benchmarks. For those who do not use benchmarks, consider the following uses, tips, and best practices:
Most common use is as a "snapshot view" of your client's account or household returns. For example, you and your clients may be more comfortable discussing returns with the aid of a table visualization, but you don't want a detailed history of time periods like what is displayed in the Performance Summary report.
If you have target returns to hit financial goals, use the the returns to help maintain accountability, demonstrate execution of value, and discuss recalibration of investment strategy as necessary.
In both bull and bear periods, consider using the comparison of the MTD return to ITD and other longer time periods to help keep your client grounded in long term thinking.
If you do use benchmarks, in addition to the prior uses, tips, and best practices, consider the potential of the following:
If you are not trying to beat a benchmark, you can use your benchmarks as valuable context for a wide ranging market returns.
If you are trying to beat a benchmark, they provide key accountability and ease of demonstrating value in a short and long term view of your client's returns compared to their benchmark.
If your client is invested conservatively and you include aggressive benchmarks, in bear markets this report can provide good context on risk of variability in market returns.
Remember to remind your client that indexes are pure returns without any associated costs of investing, and as such, will impact those return numbers compared to your client's. (consider using an investable benchmark for a more realistic/tangible benchmark to discuss with us–contact us for help)
If you have additional ways of using this report that you think other advisory firms may be able to benefit from and you would like to share them, we would love to hear from you!