Factset stock pro and cons1/27/2024 However, since so far nobody has invented a crystal ball, the final decision must be made by the client. The advisor should certainly point to all known pitfalls of potential investment options and weigh the pros and cons. With good financial advisors, the situation is analogous. The main point here is that after the doctor has provided their expert guidance and the information they deem appropriate and comprehensible, the patient is tasked to make their own decision. When talking with a patient receiving the diagnosis of an illness, the doctor does their best to provide information about different treatment options, identify the risks, discuss potential treatment plans, and of course, point to the different chances of recovery. The role of fully independent advisors acting in clients' best interests is comparable to that of a doctor. These questions can become important door openers for deeper client relationships. How would the standard of living of a 59-year-old client need to change if a severe depression hits the markets? What does the overall exposure of a 29-year-old young professional couple look like after marriage? Why might it pay for a wealthy 45-year-old investor to convert a portion of inherited real estate into more liquid traditional assets? By leveraging advisors' experience, it should not be difficult to create standardized personae and design workflows, which seamlessly answer these questions in a robust, evidence-based way. Second, software support for investor personae along the traditional lifecycle model might help ask the right questions at the right time. How can a portfolio be hedged against market downturns without realizing accrued investment gains? What is the most cost- and tax-efficient way to withdraw x% of the portfolio?Ĭan the client profit from "tax-loss harvesting"? Which current investments of a client portfolio should be exchanged for others and why? Which security would best complement a client's existing portfolio from a return, risk, and diversification perspective? While personalization and scale sound like contradictory concepts, the solution can be found in "mass-customization." What does mass-customization mean in practice?įirst, your analytical platform needs to provide solid answers to investors' most basic questions, such as: In contrast to this one-size-fits-all allocation, we expect that in the future most investors' portfolios will be personalized. Depending on a client's risk profile, their money is deployed to one out of X pre-defined model portfolios. Portfolios are often structured identically for different clients (this is exactly what most robo-advisors are doing). Nevertheless, people's fundamental interests and beliefs have widely been neglected by advisors. The growing interest in ESG-related investment topics illustrates that many investors want to see more from their deployed money than investment performance. Here we focus on having a platform that is personalized and emotionally engaging as well as extendable. Previously, we discussed the importance of developing a modern wholesale distribution platform that is informative and monitoring. In this series of articles, we concentrate on the technology part of this story and review some of its key characteristics. Many wholesalers are transitioning these services to a new and more advanced level by supporting their specialist teams with advanced analytical platforms. These teams are often not only responsible for building and maintaining their internal tooling (e.g., for portfolio construction) but also are employing their tools to deliver on advisors' requests. That is one reason why many wholesalers began to set up specialist teams. There simply is no human who can perform sophisticated mathematical optimizations without any technological support. For sure, all of them are experts in their individual product domains, but only a few have the competencies to deliver on the more complex needs, such as sophisticated portfolio construction or financial planning services.īecause these higher value services are not only more demanding from a communicative point of view but also from a data, analytical, and computational perspective, technology clearly plays a significant role. However, wholesalers' sales forces are often not well prepared to deliver on these requests. They request investment know-how beyond simple product pitches. Rethinking the Wholesale Distribution Workflow (Part 3) Wealth Managementīy Thomas Etheber, PhD, CFA | September 22, 2021Īs advisors continue to move from purely product- to solution-oriented sales and advisory processes, the questions raised to their wholesaler partners have naturally gained in complexity.
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