Proactively monitoring goal and investment risk

By Guest on 02 June 2014
Proactively monitoring goal and investment risk

This article was first published in the Summer 2014 issue of Finance on Windows

Next to goal setting and risk profiling, one of the most important tasks of a financial advisor is to help clients reach each of their goals by proactive monitoring. To do so, they need a monitoring and alert tool, such as Figlo Wealth Watch. With this tool, the financial advisor can proactively monitor the feasibility of each specific goal of the client, as well as the investment risk of the products, in an easy way and on a daily basis. 

In the Figlo Wealth Watch, the financial advisor has an overview of the total income, expenses, assets, liabilities and prioritised goals relating to that client. In each category, one or more product card can be assigned to one specific goal, called a bucket. So, for example, there could be a pension bucket and a bucket for the education of the client’s children, plus others. For all the client’s different goals, the financial advisor will select one or more product cards. By combining the product cards with a database running actual product information, such as expected return and volatility, the Figlo Wealth Watch can calculate the actual average investment risk, as well as the expected feasibility – based on the Monte Carlo simulation – of the future specific goal in real time.  

For example, a client might want to save money for their children’s education in 2032 and needs Ä50,000 to reach this goal. By inputting the information into the Figlo Wealth Watch, the advisor and the client can learn that the possibility of reaching this goal currently is only 22%. They can also see that the actual investment risk is moderate defensive. The client may subsequently want to take action to raise the feasibility of this goal. The Figlo Wealth Watch conducts the feasibilities based on actual constraints, such as target capital, premium, realisation data and risk profile. 

On this basis, the Figlo Wealth Watch will automatically calculate five ways to reach the goal on a daily basis. The advisor can take each of these variables as a starting point to reach the goal. But after discussing it with the client, the advisor can then change the feasibility to 90% – where the Figlo Wealth Watch will automatically update the outcomes, recommending that the client pays in an extra lump sum of  €7,500 –put in a periodic payment of €160 per month, postpone the realisation date from 2032 to 2034 or change the target capital to €35,000. The advisor and the client can now decide which solution is the most appropriate and preferable to the client.

By using the Figlo Wealth Watch solution, financial advisors can provide a more personalised service to customers, and the clients are able to better manage their finances by setting accurate and achievable goals.

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