The Birth and Evolution of the Chappell Mayfield Investment Dashboard(TM)

Tuesday, May 11th, 2010 by Cass Chappell, CFP®

the-birth-and-evolution-of-the-chappell-mayfield-investment-dashboardtm

Like many great ‘client friendly’ tools, the Chappell Mayfield Investment Dashboard™ was born out of necessity.  During our quarterly and annual investment reviews, it became apparent that we were inundating our clients with information from too many sources.  Each fund had its own quarterly fact sheet with statistics and numbers, the actual advisory statement was nearly a dozen pages, commentary from the managers varied from one to five pages, and the various benchmarks took up at least two pages.  We needed a way to organize several key pieces of information in an easy to read format.  A client, who is a retired executive with extensive experience reviewing numbers, assisted in the creation of the template and served as our sounding board.

Soon after, the Chappell Mayfield Investment Dashboard™ was born.  Over the years, we have refined the visual appearance of the Dashboard, to increase clarity, as well as the criteria we use to evaluate performance. The dashboard addresses four critical areas—Performance, Allocation, Contributions/Distributions and Changes Made to the Portfolio.  Many of these metrics are missing from even the most sophisticated client investment statements.  We subscribe to several different software programs and reporting tools to gather the data and put it all into one fluid report.  Each of the dashboard’s components serve a vital purpose in helping the client understand exactly where their portfolio, and their retirement plans, stand at that particular point in time:

1)  Performance: The investing world is full of statistical measures that are very difficult for most investors to understand. Using an intuitive layout and color coded tabs (click here for a larger, easier-to-read Dashboard), we were able to create a tool that virtually any client can understand, regardless of investment experience. Performance is shown in the following metrics:

  • Performance relative to Benchmark (most recent quarter, 1, 5 & 10 years)
    • GREEN indicates outperformance versus the benchmark, YELLOW indicates even versus the benchmark and RED indicates underperformance versus the benchmark.
    • Performance versus the benchmark is important, but it doesn’t indicate how other investments with the same benchmark may have fared.  That requires that we show:
  • Performance relative to Peers (measured in percentile over 3 & 5 Years)
    • GREEN indicates top quartile, YELLOW indicates second quartile, and RED indicates bottom half.
    •  Several studies have shown that most top managers spend at least some time in the bottom half of their peers – we take that into consideration.
    • The “home run” is having a manager move from the bottom half to the top quartile WHILE you are invested with them.
    • A manager that is moderate or even conservative may never appear in the top quartile.  Then again, they may never appear in the bottom quartile either.
    • That leads us to try to quantify risk:
  • Upside/downside Capture versus Benchmark (measured in percentages)
    • In the last 12 quarters, when the benchmark has gone UP, how much has this investment participated?
    • In the last 12 quarters, when the benchmark has gone DOWN, how much has this investment participated?
    • Numbers over 100 indicate more volatility than the benchmark
    • Ideally, an investor would want a higher number in the UP capture and a lower number in the DOWN capture
  • Outlook indicates our general opinion of the particular investment
    • GREEN means that we are firmly in support of this investment
    • YELLOW indicates that we have this investment on our “watch list,” but it is too early to recommend a change
    • RED is the “sell” signal.  When clients see RED in this column, they know that we will have a change to recommend to them

2)  Allocation:  the Dashboard illustrates the portfolio of the client according to asset classes

  • Color coordinated pie charts show  the percentage in every asset class
  • Illustrates holes in portfolio or lack of proper balance among stocks/bonds/alternatives
  • Shows the return of the entire portfolio over various time frames

3)  Contributions/Distributions (not shown):  shows the historic account of money coming into or out of the client’s portfolio

  • The actions of the investor will affect performance
  • Client’s need to know how much they have taken/added to their portfolio – having it all in one place makes the investing experience easier

4)  Changes to Portfolio:  tracks any changes made to their investments

  • A critical component to hold us accountable for our recommendation to buy/sell something
  • Gives some retrospective view to historic performance and decisions

Combining this information into one place is not just unique, it is extremely powerful.  The Dashboard’s most valuable trait is that it helps us focus the client on what matters.  It is color coordinated.  So, if the client sees RED in the outlook column, they know that we are going to be recommending changes.  If it is all GREEN, we will spend more time talking about their family vacation.  There isn’t a single document, to our knowledge, that simultaneously addresses all four of these critical areas.  In a matter of minutes our clients know exactly where they stand. Without a doubt, this has been an important component in building loyalty and strengthening the relationships that we have with each of our clients.

  • A critical component to hold us accountable for our recommendation to buy/sell something
  • Gives some retrospective view to historic performance and decisions

Combining this information into one place is not just unique, it is extremely powerful. The Dashboard’s most valuable trait is that it helps us focus the client on what matters. It is color coordinated. So, if the client sees RED in the outlook column, they know that we are going to be recommending changes. If it is all GREEN, we will spend more time talking about their family vacation. There isn’t a single document, to our knowledge, that simultaneously addresses all four of these critical areas. In a matter of minutes our clients know exactly where they stand. Without a doubt, this has been an important component in building loyalty and strengthening the relationships that we have with each of our clients.

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