Business News

GUEST BLOG: Financial planning tools for start-up advisors

By Business & Finance
12 December 2016
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By William Wagner, Strive Lending

If you are a start-up financial advisor, you will face overwhelming anxieties, like how to stand out from a crowd of legendary financial advisors who have more experiences and how to acquire a client or how to efficiently grow a portfolio.

You want to prove yourself as someone who can truly deliver results and to gain the trust of your clients as well as have more referral from them.

It is difficult to be fresh and young, because in most cases you will be unfairly judged, and your lack of experience will scare people away from you. The number of financial advisors are also growing, accountants are also such a huge population and thousands more of professionals are working in the same field.

You are not alone. There are thousands more start-up financial advisors who just joined the waves and you probably have the same questions, what are the tools I could use so that I would sound like a pro?

RISK MANAGEMENT METHODS

Risk management is a study done by financial advisors and financial firms at large, to develop an accurate measurement of the effect of adverse situations such as global economic crisis on a company or a client’s investment portfolio.

One known method is portfolio stress testing, utilised by financial advisors to determine possible risks and to create possible strategies that would lessen the gravity of losses of a portfolio in case a financial crisis arises. In short, it shows the consequences of economic risks on client portfolios.

In most cases, it is a computer-generated simulation to gauge the capability of a company, industry or a portfolio to resist possible economic stressors. Stress testing software can allow combination of stressors to have better comparison to possible real-life situations.

It is difficult to be fresh and young, because in most cases you will be unfairly judged, and your lack of experience will scare people away from you

Stress testing is integrated with other risk management methods by financial firms such as banks and financial advisors for them to give their clients an idea about adverse possibilities that can affect their clients’ financial portfolios in the future.

In relation to that another risk management method, value at risk (or VaR) is used to calculate how much is the financial risk or how much is going to be lost in a client portfolio in a specific timeframe.

Even though it is also used a standard risk management tool, VaR doesn’t have a standard statistical model and cannot incorporate all possible risk results. Since VaR doesn’t have a solid statistical technique, other factors such as prospects and mortgage rates are underestimated and inappropriately measured.

STRESS TESTING TOOLS

Among many financial institutions who give an annual stress testing to individual investors’ portfolios is JP Morgan Chase. It is important to have a stress testing tool, program or software to automate the process, because manual stress testing can take a lot of time and effort.

Aside from the stress testing tools, there are also other tools that will help financial advisors like you to get more clients.

Tools that automate human processes have been developed to give a wonderful experience for both the investor and the financial advisor. It makes the job faster and easier for the financial advisor and it makes the complex process easy to comprehend for investors.

HIDDENLEVERS

The developers of HiddenLevers understand the dilemma of presenting an idea to a client who is not so acquainted with financial terminologies. It has a client-friendly interface that makes it comprehensible to a layman’s eyes.

HiddenLevers addresses the needs of stress testing, risk monitoring tool and fiduciary to clients.

It has four major model components: (1) scenarios, (2) levers, (3) industries and, (4) assets. Scenario is an illustration of an economic event, works hand in hand with levers or economic markers. Levers are major economic values like GDP, CPI, PPI, trade balance report and industry specific indicators such as shipping rates and housing starts.

HiddenLevers has a fixed list of industries and can add more according to the movement of the market.

Each stock is then identified to whichever industry they would belong to, and can be assigned to two or more different industries under its shadow. The lever movements determine the impact. The user can tweak the levers that may be specific to a certain industry indicator.

In comparison to Monte Carlo and VaR, HiddenLevers has associated significant indicators that rules in the macroeconomic level. Both the other risk management methods apply easy to understand factors but are too limited to give accurate and complete impact on an investment when speaking economy as a whole.

CRM TOOL

The relationship between an investor/client and a financial advisor doesn’t only start and stop with shaking hands and regular meet ups.

Even if the financial advisor has too much potential and the client is very open to discussions and amenable, if the financial advisor fails to communicate his or her thoughts effectively, the client may have doubts.

It is important to choose the right CRM that would work for both you and your clients. It should not ask too much time for you to understand and navigate. It should have a personal approach and look to clients, something that is less or not intimidating.

As a financial advisor you are tasked with giving accurate reports to your clients and that is where your CRM tool is going to help you.

FI360 TOOLKIT

The fi360 Toolkit is a reporting CRM tool that is specialised for financial advisors with customizable templates. It allows you to add your company logo (if you are connected with one), or if you run your own firm, you can upload your own trademark.

On the client’s end, it is an easy tool that allows them to store and access data up to when their name appeared in the system. This is very helpful when you are trying to give them a trending update.

PRECISEFP

This is also another kind of CRM tool that allows you to customise your data forms specific to your clients’ background, making it convenient both ways. Their aim is to provide accuracy in data gathering and to create the correct financial plan that would best suit the needs of their customers.

The process is quite easy, the advisor has to create a form, customised and professional looking that is also comprehensible and efficient at the same time. The said form will be sent out to each client and each individual client will receive and review their form until completion that is then shared to the advisor who then syncs it to other applications.

REBALANCING

Rebalancing customer portfolio has been such a tedious task for financial firms and the investors as well. This process normally take weeks or even months to finish, good thing rebalancing programs are available to automate the process with accuracy, less prone to errors, and saves tons of money from taxes.

Rebalancing is needed for one to cross-check the movement of assets on their portfolio, without proper rebalancing one can not really prove that there is an increase or decrease of assets.

Tools that automate human processes have been developed to give a wonderful experience for both the investor and the financial advisor

TRADEWARRIOR

One of the known rebalancing software is Trade Warrior. It is connected with multiple custodians, portfolio management systems and analysts.

The web version of trade warrior looks like a Microsoft application, making the navigation familiarization really easy for its end users, like the financial advisors. You can group portfolios and create a new portfolio out of a portfolio that you are currently working with. You can also set how often you want to have the rebalancing on each account.

TAMARAC

Like Trade Warrior, the processes in Tamarac advisor rebalancing offer the automation of rebalancing and reconciling your clients’ portfolio.

It has similar features to Trade Warrior and also looks like a Microsoft Window that looks very familiar to people. It is easy to navigate and can rebalance an account in a short amount of time, which is usually around 20 minutes.