As an individual investor, or as a financial planner advising one, you will be aware of the contradictory messages surrounding investing in the financial markets. Take risk, but not too much risk. Seek return but don’t sacrifice long-term growth for short-term gain. Be alert to market trends, but don’t buy into fads. These messages can be confusing.
However, facing increasing regulatory and competitive pressure as well as looking to tap into mass affluent customers, the incumbent wealth managers, as well as new players, have been looking into ways to make such financial planning experiences more scalable. Before we dig deeper, let’s go back and identify what people need to do to plan and - yes - even enjoy their investment journeys.
Risk is often misunderstood. Most people are risk-averse and do not put enough money into high growth stocks. Diversification is important, but even well-diversified portfolios may need rebalancing over time, and it’s important to keep customers in the know of their investments’ riskiness at any moment.
Timing is everything. It’s important to avoid emotion-driven decision-making. Your customers may get excited about a particular company when it is in the news and its share price is soaring. But is that the right time to buy into a trend? Advanced analytical tools may help your customers and financial advisors turn this decision-making into a more visual and intuitive experience.
Constraints are unique to each individual. Everyone has specific needs in regard to time horizons, tax liability and living expenses. An adviser can help with portfolio construction, with selecting investments that meet your return and risk profiles, timings and constraints. Modern technology makes this process even more efficient as open banking tools can aggregate customers’ accounts and verify salaries in a matter of seconds.
It’s useful to think about investment journeys as a virtuous cycle of actions: actions your customers can take together with their trusted advisers or in your institutions’ app. Portfolio construction is just like any other project. The first step is to identify your customers’ risk appetite, then evaluate the options, select the asset classes, purchase the investments and measure the results, with the option to rebalance if necessary.
How can banks and insurers support people, with no training in portfolio theory, to develop confidence in managing their investments? How can they make these journeys scalable? With the right tools, it’s not only possible, but also empowering.
The ability to calculate different market scenarios affecting equity, fixed income and absolute return investments, along with the probability of business cycle fluctuations, can help investors make the right choices. Visualising how your customers’ specific investment choices will succeed in different economic scenarios can help guide decision-making. While impossible to forecast the future, you can still equip your customers or advisors with the knowledge of how asset classes have performed over time and how they might perform over the next several decades. Our financial calculation engine, OutRank, presents a variety of scenarios with decision support. You can run your customers’ data through an economic scenario generator, a balance sheet simulator, or a decision-support tool to get the analytics you need to make informed choices.
Investing for our future is something we can all do to ensure our aspirations become reality. It can also be a way to support innovative businesses contributing to issues we care about, such as green energy or financial inclusion. With OutRank, you can empower your customers to pursue a unique, seamless investment journey that reflects their values and beliefs.