Products

ASI Goal-Based Proposal Solution^™

Traditionally, financial planning and investment management are provided as two distinct and separate services. With financial planning, advisors help clients assess their financial situations and set goals. With investment management, advisors help clients set an investment strategy and choose specific, suitable investment products for a client’s portfolio. Of course, the investment strategy must be responsive to the client’s goals, and the goal can’t be set in isolation from the investment strategy.

Without the right tools, advisors aren’t able to effectively combine their financial planning and investment management services in an efficient way that reflects the personal situation of every client. The result is often a suboptimal portfolio that may increase risks for investors in funding essential goals, such as a secure retirement or funding their children’s college education.

Goal-Driven Investing – A Better Way

Rather than separating the planning and investment functions, we integrate them directly. We use the intuitive and powerful concept of the Household Balance Sheet to identify the resources of the household and compare them to the financial liabilities and goals that the resources are intending to fund. Not only does this provide a valuable financial inventory, but it enables the advisor to identify the risk capacity, the level of risk the household can financially withstand, in pursuit of their goals.

Consider the following key points of differentiation when comparing the ASI Goal-Based investing approach with the traditional investment advice model:

• The Household Balance Sheet as the focal point for the advisor-client discussion. The Household Balance Sheet is an effective and efficient way to capture a snapshot of the entire financial picture of the household, and provides an initial diagnosis of the affordability of a client’s goal plan. The household balance sheet also allows the advisor to have a discussion with clients regarding priority levels within goals. Making a goal plan affordable does not have to mean giving up funding a child’s college education to plan for retirement, household goals can coexist at different funding levels. The household balance sheet allows the advisor to easily and quickly perform this analysis.


• Risk capacity driving investment recommendations. The Household Balance Sheet is a far more personal driver of advice, more so than age, time horizon, or a psychological assessment of risk. The ASI Goal-Based Proposal Solution uses the balance sheet, a comparison of a client’s financial resources versus their goals and liabilities, to create a household specific investment benchmark. This benchmark determines the household’ s capacity to bear risk as the basis for setting the level of portfolio risk in the investment accounts under the advisor’s control. While the risk tolerance questionnaire provides an important guardrail for portfolio risk, it should not be the sole driver of investment decision making. Because an investor can tolerate a certain level of risk doesn't mean the investor should bear that risk.


• Asset allocation and asset location at the household and account levels. Asset location across all household accounts will deliver better and more relevant advice, making it stand apart from the single account recommendation approach prevalent today. Clients have multiple accounts with different tax structures that require coordinated advice. The ASI Goal-Based Proposal Solution generates an asset allocation at the household and account level, considering both account tax structures and liquidity needs for goal funding.

Why the ASI Goal-Based Proposal Solution for Portfolio Selection Makes Sense – Personalization Matters 

Often, the effectiveness of investment advice isn’t determined for years, perhaps decades. Accordingly, advice methodologies cannot be compared on the basis of recommendations. Instead, one must look to the breadth and depth of analysis behind the advice to decide which recommendation is more credible. How can an advisor illustrate to an investor depth of analysis? While there is no foolproof measuring stick, the advice that is more personalized, and is reflective of more household information, is often best.

Consider these advantages of the advice generated from using the ASI Goal-Based Proposal Solution:

• Investment selection considers other resources, such as real estate holdings, current income and savings, social security, etc., not just the investment accounts.
• Investment risk determined from an analysis of the household financial picture, and not just a risk tolerance questionnaire.
• Performance defined as progress against goals, as opposed to just returns against an investment benchmark. The focus is appropriately placed on the client.

Organizations can find out more about licensing ASI Goal-Based Proposal Solution by contacting ASI Sales at 925.299.7782 or asi_sales@advisorsoftware.com.