Every investor knows they should review their portfolio regularly to achieve the perfect blend of sectors and equity positions, and to balance risk with reward. But the process of analyzing portfolios manually can be error-prone and slow. We created a new, automated analytics process for a wealth management team, allowing them to optimize clients’ investments and review the performance of accounts and financial advisors. The results were twice-as-fast turnarounds, more commissions and an increase in AUM.
Investment portfolios should be analyzed regularly to ensure they are balanced and performing well, with no over-exposure to particular sectors or excessive risk. Our client was conducting portfolio reviews, but they were using a manual process that took four to five days. As a result, they weren’t carrying out reviews as often as they wanted to. They were also looking for deeper, more sophisticated analysis of clients’ portfolios in relation to their investment goals, plus a rigorous way to evaluate the performance of their accounts and financial advisers.
Our solution for this client was divided into three phases. First, we conducted a consolidated portfolio review. We created a portfolio of all current or prospective clients, in accordance with the prescribed guidelines for their individual investment objectives and tolerance for risk. Based on this, we could provide recommendations for ETFs, mutual funds and securities that allowed clients to allocate their assets more strategically. This helped them improve the diversification of their portfolios, and align those portfolios with their individual needs. In the second phase, we honed in on the equity portion of clients’ portfolios. Using sector weightings prescribed by the bank, we analyzed clients’ equity positions to make sure their portfolios were optimally diversified, and that they were not overly concentrated in any particular area, or holding any unfavorable equity positions. Our recommendations allowed each client to take a balanced approach that was right for them. The third phase was conducted in partnership with the client’s Products and Advisory Team. First, we screened all accounts against the team’s benchmarks, to identify those that were both underperforming and outperforming. Drilling down further into the data, we also analyzed profitable and non-billable accounts on the basis of region, sales channel, local branch and other factors. We then conducted ongoing due diligence of funds, strategies and money managers by gathering the data and documents required on an annual and quarterly basis. Finally, we analyzed the performance of financial advisors using techniques including style-based analysis, risk vs. return and peer-group comparison.
Using our processes, the team can now turn round portfolio reviews within two days – as opposed to four or five days with its previous approach. By improving their portfolio review process, they have been able to boost incremental commissions by over 60%. They are also in a much better position to align each investor’s risk appetite with a suggested investment objective, improving the quality of the advice they provide. Their end clients have been so pleased with the reviews that many have made additional cash deposits, increasing overall AUM.