Are you relying too heavily on risk scores for your clients' asset allocation? Our latest research, “The Perils of Outsourcing Asset Allocation to a Risk Score,” challenges the status quo and sheds light on the potential pitfalls of this approach. Discover a fresh perspective on aligning asset allocation more effectively with your clients’ goals. On behalf of authors Martin Tarlie, Matthew Kadnar, CFA, James Montier, we hope you find our research valuable and look forward to your feedback. Key Takeaways: 1. For too long, the industry has been outsourcing asset allocation decisions to the risk score. This approach often results in portfolios that are disconnected from actual client goals and are unresponsive to changes in clients' financial situations. As a result, investors are not receiving truly personalized portfolios, leading to sub-optimal outcomes and the much bigger risk that clients don’t meet their goals. 2. Our research advocates for an Investment Policy Process that appropriately balances the crucial elements of time horizon, risk tolerance, cash flows, and return objectives into a dynamic, ongoing strategy that adapts in real time to your clients' changing lives and market conditions. 3. By pioneering not only technological innovation, but also process innovation, Nebo Wealth is redefining how the industry engages with clients, offering a more adaptive and comprehensive approach that seeks to improve investor outcomes #InvestmentResearch #BehavioralFinance #ClientFirst
Very good stuff here, team!
Helping RIAs Push Less Buttons
6moWhich is more important, the client's assumed ability to accurately quantify their threshold for tolerating a substantial loss at an undisclosed point in the future or the target asset allocation that will create an acceptable probability of successfully achieving their planning goals? Risk score seems like another unintended consequence of creating regulations that are applied to all to safeguard against a small minority of potential bad actors.