Ronald Janssen

Managing Partner PCS

Ortec Finance

Wealth + | October 2017

Private client solutions Goal based financial planning

Content

1. Introduction

2. Trends

3. Goal based financial planning

4. Digitization, robo advice versus hybrid advice

5. Summary

Our company

Our mission Solutions for institutional and private clients

RISK

AMBITION COST

Global

standard

Financial

decision making

Academic

Foundation

Enable

people

Our approach

Institutional

Investors

Real Estate

Investors

Private

Investors

Enable people to manage complex investment decisions

Institutional quality standards

Institutional market

Engine economic scenario

of the institutional market

is also used in retail market

Economic scenarios are the

engine of our holistic approach

Efficient transfer of investment

knowledge investment depart-

ment to advisor and client

Retail market

Economic scenarios are used

worldwide for more than 30 years

Investment knowledge is

integrated into the economic

scenarios

Efficient transfer of investment

knowledge to the users

of our models

Content

1. Introduction

2. Trends

3. Goal based financial planning

4. Digitization, robo advice versus hybrid advice

5. Summary

Trends in robo advice

Market developments

difference 17% 3%

Market developments

difference 17% 3%

Market developments

difference 17% 3%

Market developments

22%

difference 22 % 7% 7 %

Development of digital platforms:

from transaction

to guidance

to advice

15

Transaction

based

Platforms

One goal, one

account

Platforms

One goal, one

account with

optimiser

Multiple goals,

Multiple

accounts

Financial

planning,

investment and

cash flow

planning

Goal based

financial

planning with

optimiser

Different stages of Automated (Robo) advice

Automated

Investment

Guidance/advice

Automated

Financial

Guidance/advice

Challenges in regulation and legislation

KYC

Suitability

Appropriateness

Investment decision support

Split willingness and ability to take risk

Capacity for loss

Cost transparency

Monitoring and audit trail

Forward looking economic scenarios

are a must

MiFID expects sound advice and management of clients’ expectations

16

Methodology of risk profiling Manage risk willingness, risk required and capacity to bear losses

Risk willingness Capacity to bear

losses

How much risk is

a client willing to take? How much risk is a client

able to take per goal?

By using a questionnaire

(the emotional risk appetite)

Measured with use of

scenarios (risk, return

and feasibility)

Suitable investment recommendation and investment portfolios

Risk required

How much risk does a client

need to take per goal?

Measured with use of

scenarios (risk, return

and feasibility)

Goal based risk profiling Below the methodology, different views are possible

Probability of achieving goals

Not in line with

Risk willingness,

too much volatility

Not in line with risk

required,

too low probability

In line with risk

Required and risk

willingness

Goal: maintain the asset value corrected for price inflation

Risk attitude

Capacity to bear

losses

Corresponding risk profile

(consolidated and per product)

Know Your Customer (knowledge, experience, financial position)

Risk / return trade off (Client’s choice based on priority, willingness to bear losses)

Questionnaire

Insight into

goal feasibility,

risk & return

Assets &

liabilities /

income &

expenditures

Client level

Goal(s)

&

investment

account(s)

Risk required

Goal/product level

Developments in risk profiling, product => client

Important innovations in the market High Performance Computing AI / Machine Learning

UX / Investment decision making Blockchain

Content

1. Introduction

2. Trends

3. Goal based financial planning

4. Digitization, robo advice versus hybrid advice

5. Summary

International Goal based Financial Planning

Cash flow

planning

Wealth

planning

Goal based

Financial

Planning

An integrated approach

KYC Set goals Cash flow

planning

Monitoring Reporting

Investment

decision

support

1 2 3

6 5 4

Goal based financial planning OPAL advice

Goal based financial planning Define goals, make it simple and with fun

Goal based financial planning Holistic approach, include risk in accumulation and decumulation phase

Macro economic

realistic scenarios

Deposits

Currency risk

Asset allocation

Allocation strategy

Inflation risk

Implemen-

tation risk

(Cash flow) goals

Interest

rate risk

Private and company

taxes

Cost of services/

investment

Realistic insight into risk and return includes

Consistent approach for short and long term Investment decision support

Insight into short term risk Insight into long term risk

Investment risk

One year investment return

Risk of not reaching your financial goals

Development of assets under

1,000 economic scenarios

A client centric process that provides all information for making the optimal financial decisions

Added value of dynamic scenarios Scenario characteristics

Term structure of risk and return

Returns vary with the investment

horizon Fixed income

3%

1,5%

Institutional quality Scenario characteristics

Different correlation for different horizons

Relation between risk drivers

is not constant through time

Correlation and levels of volatility

vary over time

Investment decision support Give insight in why you take a certain investment decision

Improve the quality of investment decisions

Realistic Dynamic scenarios Standard monte carlo

Investment risk 0 5

Feasibility goal %

1

0

1

5

2

0

75

50

25

0

100

1

2

3 4 5

6

Investment risk 0 5

Feasibility goal %

1

2 3

4

5

6

1

0

1

5

2

0

75

50

25

0

100

Savings account

Very defensive

Defensive

Neutral

Offensive

Very Offensive

1

4

5

6

2

3

Goal monitoring & alerts

Monitoring of individual clients and the

total client base on a consistent basis

Advice clients and support them in investment

decision making

Manage risks and send them alerts

Comply with legislation / MiFID II

Content

1. Introduction

2. Trends

3. Goal based financial planning

4. Digitization, robo advice versus hybrid advice

5. Summary

Hybrid advice Omnichannel client experience

Online/offline client experience

Client journey starts at home,

online input client portal

Fill in questionnaire and

upload financial data

Go to branch to see

Relationship Manager

Holistic financial overview

by Relationship Manager and

update financial data

Login client, updated info

and advise online

Trends in solutions

Automated (robo)

advice

Guidance of

consumers

API

Hybrid advice

Guidance of the

consumer by advisor

and online

API & GUI

Example automated financial advice OPAL Engine–Automated financial advice (investment + cash flow planning)

Content

1. Introduction

2. Trends

3. Goal based financial planning

4. Digitization, robo advice versus hybrid advice

5. Summary

Summary

1. More focus on delivering added value to clients

2. Efficiency, solutions are connected and data (auto) exchanged

3. Risk management, next to portfolio monitoring also goal monitoring

4. Client focus and client engagement

Goal based, the way forward!

Why Ortec Finance?

Dedicated team of

250 business

specialists guarantees

practical solutions and

client centric approach

Our client base guarantees

we are engaged in the

latest developments

Strong ties with the academic

community, regulators and

practitioners and our own

Ortec Finance Research

Centre, ensure

we lead in innovation

Industry recognition

Solutions based on more than

35 years of expertise in risk

and return management and

economic scenario generation