Asset Allocation-Process

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Our Approach:
  1. Determine the client's risk tolerance and their investment time horizon. These two factors are interrelated in determining the appropriate portfolio design.
  2. Design the appropriate portfolio mix of listed Asset Categories, such as Stocks, Bonds, Money Market, and any other categories that the sponsoring company elects to include.
  3. For each included Category, select the specific investments from the list provided by the sponsor.
The Process - Summary
First, the Client Questionnaire is completed by the client. Their responses are analyzed and a brief statement summarizing their risk tolerance is presented, along with a suggested portfolio, defined by Asset Categories, not specific investments.

If the client questions their risk tolerance rating, the salesperson returns immediately to the questionnaire to review the questions with them and change any of their answers; they receive immediate feedback as to what effect any change has on their scoring. This promotes the client's acceptance of the results, and gives them a feel for the "sensitivity" of their total score to each of their responses.


Once the client agrees with the validity of the summary statement and accepts the proposed Asset Allocation, the salesperson works with them to select for each Asset Category the specific investments they wish to use. The salesperson has immediate access to information concerning objectives, holdings, performance, etc. for each investment option in order to answer the client's questions.

The Process - Step by Step
Note that you, the sponsoring company, have complete control over the design of each step: what the client sees, what the salesperson can offer and what is included or not included in each of the reports and graphs.

Client Questionnaire
  Designed in consultation with each sponsoring company, the questionnaire can be short and simple or long and complex - from five short questions on one screen to ten or more questions, each on its own screen, with supporting graphics. We can provide the questions, or you can provide them from your current sales literature or through other sources.

Scoring
  Scoring can be as simple as totaling up the client's numeric responses, or as complicated as assigning values and/or weights to each response and fitting the results into a scoring grid. The scoring will reflect your ideas as to what factors are most important. We can work with you to design the scoring procedure, or you can design it in-house. Most importantly, the scoring for each client is automatic - no more inappropriate portfolios because of addition or multiplication errors by the salesperson.

Summary Description
  The results of the scoring can be expressed in a statement as long or as short as desired, with as many disclaimers or footnotes as deemed necessary.

Proposed Portfolio - Asset Categories and Proportions
  The sponsoring company has as much control as desired over the design of the portfolios. The selection of how many and which Asset Categories to use, the assigning of the Categories to the portfolios, the number of possible portfolios (five to seven is typical) and the assigning of each portfolio to a scoring range, are all aspects that can be customized to suit your idea of how aggressive a portfolio should be suggested for each client.

Proposed Portfolio - Selection of Specific Investments
  Each of the possible investment options is assigned to one of the Asset Categories. Some categories will have several choices and some perhaps only one. This control permits the sponsoring company to properly categorize each investment option, rather than leaving it up to the salesperson. From the list of options for each Category, the salesperson and the client select those to use in the portfolio.

Investment Information
  To help the salesperson explain the features and benefits of each investment option, information concerning its history, holdings, performance, management, etc. is available with the click of a button at the point where the selection is being made. The sponsoring company can include as much or as little of this information as it chooses to.


© 2002 Concise Financial Planning Software, Inc.