Investment Governance & Suitability

Reliance on subjective assessment of a client's attitude to risk, broadly defined fund sectors, or on simple measures such as volatility has led to retail investors experiencing outcomes which fall far short of expectations.

Advisers and distribution platforms need the ability to define risk grades in terms other than cautious or balanced, requiring instead more clearly quantified measures of risk, and potential loss. Such metrics can be used to obtain a better understanding of what constitutes a client's capacity for loss and to match products to client needs.

Product manufacturers and asset managers require tools for designing products or funds which can be integrated easily into the risk-grading framework of different advice processes and distribution platforms. This means building solutions according to well-defined risk profiles and investment objectives in a way that allows for continuous product monitoring and governance.

Benefits for Product Manufacturers and Asset Managers

Demonstrate the efficiency and effectiveness of different product design or portfolio options, providing independent analysis for comparison of new products against industry benchmarks, that can support product promotion. Help build optimized risk-graded investment solutions, according to defined investment objectives and risk targets. Stress test new or existing product designs against independently defined economic stress scenarios, including products with guarantees or path-dependent investment rules. Perform what-if analysis testing the impact of updated views or active management tilts on alignment of actively managed funds with retail risk targets or fund risk-grading.

Benefits for Advisors and Distributors

Align investment solutions with clearly defined objectives and risk targets, ensure product risk can be communicated and aligned with capacity for loss, and build a process for assessing suitability which meets more stringent compliance requirements. Provide a transparent, client-focused basis for fund risk rating, and align third-party funds, portfolios, or existing investment solutions objectively. Design risk-graded strategic asset allocation benchmarks and modeling of portfolios in line with defined risk profiles. Communicate product risk in a form that focuses on potential loss, is intuitive to clients, and can be linked directly to savings objectives.