As an advisor, have you taken a close look at how you project portfolio performance for your clients? Not all models are created equal, and may not be the best solution for investors or your own practice. 

Many current methods of portfolio projection, even those powered by Monte Carlo simulations, are significantly limited, a problem that we discussed in a previous article. In our view, the future belongs to more advanced portfolio projection models driven by Economic Scenario Generators (“ESG”) and the practice-building solutions they represent. 

Let’s take a look at the limitations of the status quo as compared to using ESG to pave the way for advisors to transform their practices.

The status quo: Straight-line assumptions or simplified Monte Carlo simulations

  • Assumes historical performance is a realistic future indicator
  • Does not sufficiently disclose portfolio risk and uncertainty
  • Generally too optimistic; generates unrealistic growth assumptions
  • Ignores generally accepted economic behaviour (e.g., non-normal distribution of returns and tail risk)
  • Risk and return do not vary over time

Advantages of advanced, dynamic ESG-driven portfolio projections to manage client goals

  • More realistic time-dependent risk and return projections
  • Transparency: clients can see the probabilities of various scenarios and possible outcomes
  • Higher-quality analysis leads to potentially better decisions and outcomes
  • Continuous monitoring and re-evaluation with proactive tracking of client goals

How dynamic portfolio projections can build an advisor’s practice

  • Better matching of client decisions to their personal goals and time horizons
  • Advanced tools that offer better service in a scalable manner (i.e., without proportional increase in staff resources)
  • Positive impact on client retention and “share of wallet”
  • Automating critical functions such as plan monitoring, follow-up and segmentation

A game-changing approach to portfolio planning and monitoring

Integrating a transformative solution into an advisor’s practice may require firms to look to a partner that specializes in analyzing risk. Ortec Finance leverages its 35-plus year track record in outsourced risk modelling to provide a proven, next-level portfolio projection platform to power better investment decisions, using technology trusted by some of the world’s largest and most respected institutional investors. 

For individual investors and their advisors, leveraging an institutional-quality technological solution can help elevate the planning and management of client goals and enhance the operational efficiency of advisor practices, ultimately helping build better client outcomes in uncertain markets. 

To get started, visit the OPAL Wealth page or download the product brochure here
For any other questions or demo request, please contact Neil Greenbaum below.

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