![]() ![]() A direct connection between produced result to clients’ preferences and the selected instruments is often difficult to make. Depending on the implementation of the automated portfolio construction, one change in the target portfolio can change the entire investment proposal. Therefore, it is difficult to understand the result of the portfolio construction and the effects of a manual change in the target portfolio followed by another automated iteration of portfolio construction. The client and the advisor remain in a "recipient" role they are not constructing the portfolio. Limited traceability of calculated investment proposals To them, neither the optimization model nor the decisions taken by the machine nor the results produced by the engine are transparent or easily understandable. Finally, the target portfolio must meet the risk profile of the client.Īs the portfolio construction is delegated to a robot or to a portfolio construction engine, the client and the advisor are left with a "black box" to explain how the target portfolio has been constructed.The asset shelf is more restricted with the risk-based portfolio approach than it was with the sell-side single stock advice.There is a rigid process that needs to be adhered to in order to be compliant.The initial investment proposal is effectively produced by a robot, the advisor has no or only limited influence on the proposed portfolio.The limitations of the relationship manager or investment advisors are: Consequently, this limits the freedom for the investment advisor of how to advise clients which is explained in the following. ![]() Second, the focus is set on "compliance" by generating target portfolios that meet the risk profiles of clients. First, there is the switch from sell-side single stock-based advisory to portfolio based advisory. However, automated investment advice also poses many challenges. The "out-of-the-box" risk-based portfolio approach has many advantages. Consequences for the client-advisor relationship Automation of the advisory process requires a certain affinity for IT, business rules management and process automation. ![]() Furthermore, the use of risk-based optimization engines requires a new set of skills in order to understand the approach and results generated by the optimization engines. ![]()
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |