Planit:Add a Portfolio
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Assets and Liabilities Screen - Portfolios
To the right you’ll see the detailed account screen accessed from the “Assets & Liabilities” screen. On this screen a new drop down list has been added called “Portfolio”. The default portfolio that’s created for every client is called “Strategic Portfolio”. This is the “Portfolio” where all holdings for existing clients in the system will be attached after the upgrade of the site to 5.2.
If you don’t have multiple portflios that require separate portfolio objectives, you can just use this default portflio for all of your client accounts. However, you can use the “Add Portfolio” button to add additional portfolio that will ultimately have unique portfolio objectives.
When I create multiple portfolio, I’m then able to identify specific portfolio objectives for each on the new “Portfolio Objectives” screen. Let’s see how this looks.
Portfolio Objectives Screen
Portfolio Objectives Tab
Let’s look at the “Retirement Portfolio”.
1) You’ll see that there are four accounts from the Assets screen that were associated with this portfolio. Mark’s Registered Investments, a Joint Non-Registered account and Mark and Maria's Tax Free Savings Accounts.
2) Take note that the client's risk tolerance is Average for both the client and spouse.
3) We can also identify the goals from the Objectives screen that are associated with this portfolio.
4) We then identify some key portfolio objectives that relate to the time horizon for the use of the funds in this portfolio, the risk capacity the client has relative to the goals associated with the portfolio and if Socially Responsible investing is of importance to the client.
Selection & Validation Tab
5) We have also provided an area where you can identify any special constraints the client has relative to this portfolio.
6) Finally you’ll either retain the recommended portfolio in this case it is "Balanced" or change it if you wish. Click on Save and you are done.
Now let’s look at how the two other portfolios we created differ relative to their portfolio objectives.
Here we see the “Education Portfolio” that is associated with the goal for David’s education.
On the education portfolio you will notice that the risk tolerance is "Average" but the you will also notice that the recommended portfolio is “All Income” not “Balanced" like the Retirement Portfolio. This is because of the shorter time horizon with the Retirement Portfolio the time horizon was 4-5 years as with portfolio the horizon is "Within the next year". These horizons were identified by the “Portfolio Objectives” questions.
Boat Upgrade Portfolio
Now let's look at the Boat Upgrade Portfolio:
With this third portfolio, you’ll notice that again the risk tolerance was “Average” but the recommended portfolio is “Income”. Not “Balanced” like the Retirement Portfolio and not “All Income” like the Education portfolio. In this case the time horizon was from 1 to 3 years which impacted the portfolio recommendation.
Once a portfolio has been selected for each portfolio, you can progress to the Asset Allocation screen and view the resulting asset allocation for each.
Rather than just “score” these “Portfolio Objective” questions as a traditional questionnaire would, the new methodology implemented by PlanPlus allows a decision tree to be constructed that looks at three factors, and based on the combination, recommend the appropriate investment strategy. Here’s an example:
As can be seen here, for a client with a Low Risk tolerance, a short time horizon of 2 – 5 years, they would be mapped into a very conservative portfolio, if their risk capacity is low or moderate. However if they have a higher degree of risk capacity, they would be mapped into a conservative portfolio.
Here’s another example for a client who has a high risk tolerance and a long term time horizon
In this case they might be mapped in to any one of three different portfolios based on their risk capacity. If they have little ability to adapt then a Moderate portfolio is recommended. If they have moderate risk capacity an Aggressive portfolio is recommended and if they have a high level of risk capacity then the combination of high risk tolerance, long time horizon and high risk capacity directs them to a very aggressive portfolio.
These two examples illustrate how separating the time horizon and risk capacity from the risk tolerance level allows the portfolio recommendation to be significantly more sensitive to the portfolio objectives. This could never be achieved by just combining those types of questions with the overall risk tolerance measurement. The default model grid is open to review and adjustment by any corporate client for appropriateness. In other words, your investment committee can define how your portfolio mapping is done.