February 2019

FinaMetrica Wins Wealth Briefing Award Swiss 2019

FinaMetrica - Monday, 25 February 2019

FinaMetrica has been crowned 'Best Risk Profiling Solution' at the at the 6th WealthBriefing Swiss Awards 2019.

Showcasing 'best of breed' providers in the global private banking, wealth management and trusted advisor communities, the awards were designed to recognise companies, teams and individuals which the prestigious panel of judges deemed to have 'demonstrated innovation and excellence during 2018'.

"It was difficult to identify a winner from this excellent list, but following discussion FinaMetrica stood out, not just for its dedicated and focused approach, but also for the solid academic framework that stands behind its work."

A Message from our CEO

Shawn Brayman, CEO, PlanPlus Global - Monday, 25 February 2019

The PlanPlus Global team has been working hard and we are very excited by both our progress to date and what we will be announcing over the months to come.

For those of you who attended any of the conferences in the UK, Canada, US and Australia during the last quarter of 2018, where we previewed our new product suite, SuitabilityPro™, we thank you for your interest and encouragement.

SuitabilityPro™ brings together the powerful combination of FinaMetrica's acclaimed risk tolerance measurement capabilities with award-winning financial planning software from PlanPlus. The first of the family of modules in the suite, FinaMetrica Profiler, is currently in the final stages of validation and trials with Beta users and will be available as soon as testing is completed.

For existing FinaMetrica users, you probably made the initial decision to integrate FinaMetrica into your practice because you wanted to use the world 's most researched risk tolerance assessment tool with your clients. That choice enabled you to explore and know your client far more deeply than ever before through a reliable measure of their psychological tolerance. You were then able to apply your professional judgement in light of any clear variances from the norm in your client 's responses and other factors such as risk need, time horizon, risk capacity and more to arrive at an overall risk profile or Attitude to Risk.

Of course, we all know that the compliance burden continues to increase, with the result that many advisors have been obliged to hire additional staff and incur other expenses to document that they are providing suitable recommendations for their clients. You will be delighted to know that the enhanced FinaMetrica Profiler offers an expanded solution with many new features:

• A new adaptive interface that enables access and use by you or your clients on any device - very fast and easy to operate;
• The ability to continue with the risk tolerance assessment you and your clients have come to know and love; or expand it, on a fully integrated basis, to include capacity for loss, time horizon and to reflect your professional judgement in arriving at a profile - quickly and consistently;
• More robust portfolio analysis - based on full asset allocation models, integrated stochastic modeling and implementation with your solutions or mapping to existing solutions in the market - dynamic and with a new FinaMetrica Seal;
• New professional documents that clearly present your integrated proposition to your clients

And here is the really good news! The FinaMetrica Profiler module will be available to existing FinaMetrica users at the same price as today, in most major markets. All this enhanced functionality - and no price increase for most users!

We will work with all our existing integration partners to ensure current FinaMetrica users will maintain access to their existing capabilities; as well as open the door for the new capabilities. If you are part of a larger network of users, we will be in dialogue with your home office to coordinate next steps. So, if you see announcements over the next few weeks and wonder "when will I get access to these wonderful new features", rest easy and know that they are on their way.

Best wishes for 2019 and we look forward to continuing to work with you to make your practices more efficient, bulletproof, professional and profitable!

Gambles Don't Belong in Investment

FinaMetrica Pty Limited - Monday, 25 February 2019

Gambling is very different to investing. Yet some people use questions about gambling to measure a person's financial risk tolerance and determine appropriate investments. Unfortunately, it's a flawed approach that is putting both clients and advisers at unnecessary risk.

'Gambles' is an unproven methodology for risk tolerance, with no scientific evidence to support it. It's unreliable, often returning different results when people retest. It's also a hard test for most people to do, containing complicated mathematics including probabilities.
 
But the problem with gambles runs deeper than the fact that they do a very poor job of measuring risk tolerance. At the same time as they are failing at their core task, gambles tests stand out as simply inappropriate in an investment advisory setting.
 
Professional money managers never have (and never will) promote themselves as gamblers. Their promise to investors is not that they are 'playing the odds' - it is that they are executing an investment strategy that is well conceptualized, properly researched and disciplined.
 
All of the mahogany on the walls and deep blues in the logos are about reassuring investors that they are professional, reliable, reasoned and dependable. All of those qualities are denigrated and diminished when complex investment decisions are seen to be made using questions about a coin-toss.
 
Meanwhile, people most likely think and respond differently to choices involving hundreds of thousands of dollars in retirement savings than they would for an idle $20 being put down on a roulette table.
 
Gambles tests were developed in university laboratories, using tiny amounts of money (often just a few dollars) where wins or losses really didn't matter. Most of the people taking the tests were students aged 18-21. It was not a representative population, or environment.
 
Critically, these questions were not being asked to help understand risk tolerance.
 
The people who came up with 'Prospect Theory' never had risk tolerance in mind - they were developing insights to help marketers overcome people's reluctance to make purchases because of the fear of the purchase not meeting expectations (a 'loss'). To this day, the creators of prospect theory have never supported claims that it means anything at all in an investment setting.
 
If the gambles methodology actually worked better than all other methods it might, perhaps, be worth 'working-around' the wrong messages gambles-tests send and their inappropriateness around investments. But there is no scientific data to say gambles work at all. All that pain is coming for no gain.
 
That's in stark contrast psychometric testing, which is the gold-standard for measuring financial risk tolerance. It has been rigorously tested in academic and real-life settings and proven to be accurate, reliable and dependable.
 
The science of psychometrics is well established and proven - psychometric testing works. It's been used to test financial risk tolerance for more than two decades, with millions of datasets collected.
 
The risk for investors who meet a gambles-based risk tolerance test is that it fails to accurately measure their risk tolerance, and they end up invested in inappropriate assets. If nothing goes wrong, they might 'get away with' this arrangement. But if things do go wrong, say a market correction, holding the wrong assets can spark a chain of financially devastating events.
 
The risk for advisers using gambles-based tests is that the finger of blame will be pointed at them by those financially-devastated investors. The regulatory, legal, financial and reputational risks of being found to have 'got it wrong' are very real - and very consequential. Today, even multi-billion dollar companies can be almost destroyed overnight by revelations that they failed to care for their retail investors.
  
For an industry based on understanding and managing risks, an analysis of the risks and rewards of using gambles-based risk-tolerance tests seems appropriate.
 
The risks are clear, and present - it is an unproven and unsupported methodology that produces unreliable results. Meanwhile, it's terribly difficult to see any reward for that risk - gambles is an inferior methodology compared to the alternative, which is psychometric testing.

The Rathbone's Funds and DFM Strategies

FinaMetrica Pty Limited - Thursday, 14 February 2019

We are pleased to announce that Rathbone’s range of fund and DFM strategies, using their unique ‘LED’ approach to asset allocation and risk management, are now mapped to the FinaMetrica risk tolerance scores.

Under the LED approach, portfolio diversification is built on risk protection, rather than relative and potential returns.  At Rathbones, particular focus is on how different asset classes, instruments and funds behave at points of market stress as well as using the liquidity of assets to meet clients’ cash flow requirements and avoid forced selling.

A short video on the Rathbone LED framework and its use within private client portfolios can be found here: https://vimeo.com/309898432/75a1fac6df

The Rathbone Multi Asset Portfolio funds managed by David Coombs and Will McIntosh-Whyte and the ‘IFAIC’ discretionary managed strategies created specifically for working with financial advisers, adopt the LED framework and both sets of funds or strategies have been mapped by FinaMetrica.
This means that advisers choosing to access Rathbone’s LED approach, either via a multi-asset fund (including on platform) or via a discretionary managed service, can do so in the knowledge of how this relates to the client’s risk profile.  LED used within the multi-asset funds can also be accessed through an MPS and a unitised discretionary solution, both from Rathbone Investment Management.