“You don’t have to be a genius or a visionary or a college graduate to be successful. You just need a framework and a dream”, said Michael Dell, Chairman and CEO of Dell Technologies.
While we all have dreams, we seldom have a framework to achieve what we desire.
In investing, creating a robust framework for portfolio recommendations is essential for an advisor to help their clients (investors) achieve their financial goals. Such a framework needs to consider various factors such as an investor’s risk appetite, their behavior during market volatility, available market opportunities, right mix of investment products, optimized portfolio allocations, periodic reviews and so on.
Optimizing the portfolio, one of the most important steps, not only involves analyzing large volumes of data, (we, at Fintso, are using data since 2002 in the asset allocation framework, i.e. 3500+ data points) but also requires a deep understanding of the ever-evolving financial landscape. To add to this complexity, selecting the right investment opportunity within each asset class makes it difficult to create an optimized portfolio well suited for your investor’s risk profile.
In this article, we aim to provide an overview of the framework which we have set-up to assist advisors in creating an optimized portfolio for their investors:
1. Risk Quantification:
The first step requires an advisor to quantify the investor’s risk appetite. The same needs to be articulated to the investor as it helps them understand the underlying risk in the portfolio. Click here for our article on Measuring Risk.
Each part of the financial goal has a different risk. For example, the risk one may be willing to take for their child’s education is much less than risk one can take to buy their dream car – even if both have the same time frame. So, one may be “Conservative” for a goal, and other could be “Aggressive”.
2. Asset Allocation:
The next and most important step is creating a portfolio with the right mix of asset classes for your client based on their risk profile.
We use a detailed analytical framework, using Mean Variance Optimisation (MVO) to arrive at an Efficient Frontier, and then defined model asset allocation for each risk profile. The detailed process is as follows:
3. Product Selection:
The next step involves selecting the best suited investment products within each asset class. Using our fund selection framework and an investment framework, a portfolio is created for each goal.
4. Review:
Periodic reviews help investors stick to their path of financial goals. It also helps monitor the recommended portfolio on an on-going basis.
5. Triggers:
Event-based alerts and reviews coupled with continuous evaluation of attractive market opportunities enhances the portfolio outcomes.
We have implemented the above framework to create model portfolios for each risk profile.
We are also implementing a mechanism to review and monitor client’s portfolio so that an advisor, can pro-actively engage with investors and guide them to meet their financial goals, be it their child’s education or buying their dream car.
Meet the Investment Team
Rajan Pathak
Co-Founder and MD
Rajan was a member of team who launched India’s 1st Multi-Manager and Fund of Funds AMC concept in India.He had also launched India’s 1st Multi Asset, Multi Product “WRAP” Accounts with online action capabilities.
These WRAP accounts were Ranked with a 4 Star by Value Research for process and performance. With more than 2 decades of experience in financial markets, Rajan’s accomplishments include establishing successful B2B businesses supporting the financial entrepreneurs. His vast experience & deep understanding of advisor’s need help us build a strong framework of actionable insights.
George Mitra
Co-Founder & CEO
George was part of the Investment Committee and has been instrumental in designing the algorithms for products and advisory in his previous firm. George had helped design the Financial planning software and created the models for Asset Allocation using Efficient frontiers way back in ’00 while in Deutsche Bank. With over 25 years working with Ultra-HNI clients, George has a deep understanding on designing solutions for the end clients.
Kumarpal Jain
Head – 3rd Party products
Over the past 8-years in the Indian financial markets, Kumar has developed an intrinsic understanding of different asset classes and built an excellent product knowledge by working for top wealth management firms.
He was a core member of the team that created the processes that were used for fund selection in both these previous organizations and is now working to bring the same level of research and advisory to financial advisors.
About Us
Fintso, with the help of technology, is using cutting edge tools to create and monitor investments at a portfolio level. Along with the best mutual funds app for android and best mobile apps for mutual fund investment that our platform provides for the investors, Fintso also furnishes financial advisors with the right mix of asset classes, best products, and an effective monitoring mechanism. This will greatly enhance the services, reach, and the efficiency of advisors, and help them make a difference in their client’s portfolio.