Ronald Janssen. Managing Partner PCS Ortec Finance

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2 Ronald Janssen Managing Partner PCS Ortec Finance

3 Private client solutions Goal based financial planning Wealth + October 2017

4 Content 1. Introduction 2. Trends 3. Goal based financial planning 4. Digitization, robo advice versus hybrid advice 5. Summary

5 Our company

6 Our mission Solutions for institutional and private clients RISK AMBITION COST Enable people Global standard Financial decision making Academic Foundation

7 Our approach Enable people to manage complex investment decisions Institutional Investors Private Investors Real Estate Investors

8 Institutional quality standards Institutional 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 Retail 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 department to advisor and client

9 Content 1. Introduction 2. Trends 3. Goal based financial planning 4. Digitization, robo advice versus hybrid advice 5. Summary

10 Trends in robo advice

11 Market developments

12 Market developments 17% difference 3%

13 Market developments 17% 3% 17% 3% difference difference

14 Market developments 22 % difference 22% 77% %

15 Different stages of Automated (Robo) advice Development of digital platforms: from transaction to guidance to advice Transaction based Platforms One goal, one account Platforms One goal, one account with optimiser 15 Multiple goals, Multiple accounts Automated Investment Guidance/advice Financial planning, investment and cash flow planning Goal based financial planning with optimiser Automated Financial Guidance/advice

16 Challenges in regulation and legislation MiFID expects sound advice and management of clients expectations 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 16

17 Methodology of risk profiling Manage risk willingness, risk required and capacity to bear losses Risk willingness Risk required Capacity to bear losses How much risk is a client willing to take? How much risk does a client need to take per goal? 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) Measured with use of scenarios (risk, return and feasibility) Suitable investment recommendation and investment portfolios

18 Goal based risk profiling Below the methodology, different views are possible Goal: maintain the asset value corrected for price inflation Not in line with Risk willingness, too much volatility Probability of achieving goals In line with risk Required and risk willingness Not in line with risk required, too low probability

19 Developments in risk profiling, product => client Know Your Customer (knowledge, experience, financial position) Assets & liabilities / income & expenditures Client level Goal/product level Goal(s) & investment account(s) Risk required Risk attitude Corresponding risk profile (consolidated and per product) Capacity to bear losses Risk / return trade off (Client s choice based on priority, willingness to bear losses) Questionnaire Insight into goal feasibility, risk & return

20 Important innovations in the market High Performance Computing AI / Machine Learning UX / Investment decision making Blockchain

21 Content 1. Introduction 2. Trends 3. Goal based financial planning 4. Digitization, robo advice versus hybrid advice 5. Summary

22 International Goal based Financial Planning An integrated approach Cash flow planning Goal based Financial Planning Wealth planning

23 Goal based financial planning OPAL advice KYC Set goals Cash flow planning Monitoring Reporting Investment decision support

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

25 Goal based financial planning Holistic approach, include risk in accumulation and decumulation phase Realistic insight into risk and return includes (Cash flow) goals Deposits Asset allocation Interest rate risk Private and company taxes Macro economic realistic scenarios Allocation strategy Inflation risk Cost of services/ investment Currency risk Implementation risk

26 Consistent approach for short and long term Investment decision support A client centric process that provides all information for making the optimal financial decisions 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

27 Added value of dynamic scenarios Scenario characteristics Term structure of risk and return Returns vary with the investment horizon Fixed income 3% 1,5%

28 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

29 Investment decision support Give insight in why you take a certain investment decision Improve the quality of investment decisions Standard monte carlo Realistic Dynamic scenarios 1 Savings account Feasibility goal % Feasibility goal % Very defensive Defensive Neutral Offensive Very Offensive Investment 0 5 risk Investment 0 5 risk 2 0

30 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

31 Content 1. Introduction 2. Trends 3. Goal based financial planning 4. Digitization, robo advice versus hybrid advice 5. Summary

32 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 Login client, updated info and advise online Go to branch to see Relationship Manager Holistic financial overview by Relationship Manager and update financial data

33 Trends in solutions Automated (robo) advice Guidance of consumers API Hybrid advice Guidance of the consumer by advisor and online API & GUI

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

35 Content 1. Introduction 2. Trends 3. Goal based financial planning 4. Digitization, robo advice versus hybrid advice 5. Summary

36 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!

37 Why Ortec Finance? Solutions based on more than 35 years of expertise in risk and return management and economic scenario generation Dedicated team of 250 business specialists guarantees practical solutions and client centric approach Strong ties with the academic community, regulators and practitioners and our own Ortec Finance Research Centre, ensure we lead in innovation Our client base guarantees we are engaged in the latest developments Industry recognition