Monday, August 30, 2010
A client reporting "no no"
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.