private client solutions goal-based financial...
TRANSCRIPT
Ronald Janssen
Managing Partner PCS
Ortec Finance
Wealth + | October 2017
Private client solutions Goal based financial planning
Content
1. Introduction
2. Trends
3. Goal based financial planning
4. Digitization, robo advice versus hybrid advice
5. Summary
Our company
Our mission Solutions for institutional and private clients
RISK
AMBITION COST
Global
standard
Financial
decision making
Academic
Foundation
Enable
people
Our approach
Institutional
Investors
Real Estate
Investors
Private
Investors
Enable people to manage complex investment decisions
Institutional quality standards
Institutional market
Engine economic scenario
of the institutional market
is also used in retail market
Economic scenarios are the
engine of our holistic approach
Efficient transfer of investment
knowledge investment depart-
ment to advisor and client
Retail market
Economic scenarios are used
worldwide for more than 30 years
Investment knowledge is
integrated into the economic
scenarios
Efficient transfer of investment
knowledge to the users
of our models
Content
1. Introduction
2. Trends
3. Goal based financial planning
4. Digitization, robo advice versus hybrid advice
5. Summary
Trends in robo advice
Market developments
difference 17% 3%
Market developments
difference 17% 3%
Market developments
difference 17% 3%
Market developments
22%
difference 22 % 7% 7 %
Development of digital platforms:
from transaction
to guidance
to advice
15
Transaction
based
Platforms
One goal, one
account
Platforms
One goal, one
account with
optimiser
Multiple goals,
Multiple
accounts
Financial
planning,
investment and
cash flow
planning
Goal based
financial
planning with
optimiser
Different stages of Automated (Robo) advice
Automated
Investment
Guidance/advice
Automated
Financial
Guidance/advice
Challenges in regulation and legislation
KYC
Suitability
Appropriateness
Investment decision support
Split willingness and ability to take risk
Capacity for loss
Cost transparency
Monitoring and audit trail
Forward looking economic scenarios
are a must
MiFID expects sound advice and management of clients’ expectations
16
Methodology of risk profiling Manage risk willingness, risk required and capacity to bear losses
Risk willingness Capacity to bear
losses
How much risk is
a client willing to take? How much risk is a client
able to take per goal?
By using a questionnaire
(the emotional risk appetite)
Measured with use of
scenarios (risk, return
and feasibility)
Suitable investment recommendation and investment portfolios
Risk required
How much risk does a client
need to take per goal?
Measured with use of
scenarios (risk, return
and feasibility)
Goal based risk profiling Below the methodology, different views are possible
Probability of achieving goals
Not in line with
Risk willingness,
too much volatility
Not in line with risk
required,
too low probability
In line with risk
Required and risk
willingness
Goal: maintain the asset value corrected for price inflation
Risk attitude
Capacity to bear
losses
Corresponding risk profile
(consolidated and per product)
Know Your Customer (knowledge, experience, financial position)
Risk / return trade off (Client’s choice based on priority, willingness to bear losses)
Questionnaire
Insight into
goal feasibility,
risk & return
Assets &
liabilities /
income &
expenditures
Client level
Goal(s)
&
investment
account(s)
Risk required
Goal/product level
Developments in risk profiling, product => client
Important innovations in the market High Performance Computing AI / Machine Learning
UX / Investment decision making Blockchain
Content
1. Introduction
2. Trends
3. Goal based financial planning
4. Digitization, robo advice versus hybrid advice
5. Summary
International Goal based Financial Planning
Cash flow
planning
Wealth
planning
Goal based
Financial
Planning
An integrated approach
KYC Set goals Cash flow
planning
Monitoring Reporting
Investment
decision
support
1 2 3
6 5 4
Goal based financial planning OPAL advice
Goal based financial planning Define goals, make it simple and with fun
Goal based financial planning Holistic approach, include risk in accumulation and decumulation phase
Macro economic
realistic scenarios
Deposits
Currency risk
Asset allocation
Allocation strategy
Inflation risk
Implemen-
tation risk
(Cash flow) goals
Interest
rate risk
Private and company
taxes
Cost of services/
investment
Realistic insight into risk and return includes
Consistent approach for short and long term Investment decision support
Insight into short term risk Insight into long term risk
Investment risk
One year investment return
Risk of not reaching your financial goals
Development of assets under
1,000 economic scenarios
A client centric process that provides all information for making the optimal financial decisions
Added value of dynamic scenarios Scenario characteristics
Term structure of risk and return
Returns vary with the investment
horizon Fixed income
3%
1,5%
Institutional quality Scenario characteristics
Different correlation for different horizons
Relation between risk drivers
is not constant through time
Correlation and levels of volatility
vary over time
Investment decision support Give insight in why you take a certain investment decision
Improve the quality of investment decisions
Realistic Dynamic scenarios Standard monte carlo
Investment risk 0 5
Feasibility goal %
1
0
1
5
2
0
75
50
25
0
100
1
2
3 4 5
6
Investment risk 0 5
Feasibility goal %
1
2 3
4
5
6
1
0
1
5
2
0
75
50
25
0
100
Savings account
Very defensive
Defensive
Neutral
Offensive
Very Offensive
1
4
5
6
2
3
Goal monitoring & alerts
Monitoring of individual clients and the
total client base on a consistent basis
Advice clients and support them in investment
decision making
Manage risks and send them alerts
Comply with legislation / MiFID II
Content
1. Introduction
2. Trends
3. Goal based financial planning
4. Digitization, robo advice versus hybrid advice
5. Summary
Hybrid advice Omnichannel client experience
Online/offline client experience
Client journey starts at home,
online input client portal
Fill in questionnaire and
upload financial data
Go to branch to see
Relationship Manager
Holistic financial overview
by Relationship Manager and
update financial data
Login client, updated info
and advise online
Trends in solutions
Automated (robo)
advice
Guidance of
consumers
API
Hybrid advice
Guidance of the
consumer by advisor
and online
API & GUI
Example automated financial advice OPAL Engine–Automated financial advice (investment + cash flow planning)
Content
1. Introduction
2. Trends
3. Goal based financial planning
4. Digitization, robo advice versus hybrid advice
5. Summary
Summary
1. More focus on delivering added value to clients
2. Efficiency, solutions are connected and data (auto) exchanged
3. Risk management, next to portfolio monitoring also goal monitoring
4. Client focus and client engagement
Goal based, the way forward!
Why Ortec Finance?
Dedicated team of
250 business
specialists guarantees
practical solutions and
client centric approach
Our client base guarantees
we are engaged in the
latest developments
Strong ties with the academic
community, regulators and
practitioners and our own
Ortec Finance Research
Centre, ensure
we lead in innovation
Industry recognition
Solutions based on more than
35 years of expertise in risk
and return management and
economic scenario generation