Guess the sex of this offspring from an institution
Isn’t he beautiful? So cute. We need to start college savings for the son of the institution. What shall we call him?
I often hear that human investors need to be smart, unemotional, and as committed as institutional investors. They should use the same money managers, the same “time-tested” methods as the institutional investor. That way, they will be forced to buy low and sell high. Smart people do it that way.
So, when was the last time your institution gave birth? Had a divorce? Was laid off from work? Had to pay for four years of private college tuition?
People are not institutions! They have specific timelines and unique distribution needs. The institutional method suggests we need to “assess their risk profile.” This requires the prospective investor fill out a multi-page questionnaire identifying how much pain they could tolerate in order to successfully identify someone’s risk profile. I have news for you. Even the compliance officer who demands this document be completed before making any investment recommendations knows full well, this document is flawed from the beginning!!!
https://adviserbusinessreview.com/risk-profiling-tools-remain-flawed-need-new-approach/
https://www.cbsnews.com/news/three-fatal-flaws-of-risk-profile-questionnaires/
The answers to the questions on the risk profile will most likely reflect the most recent experience of the investor. A family who answers in 2019 will, most likely, be more risk accepting than if the same family answered the questions in 2009!
The institutional method recommends “systematic rebalancing” back to the original allocation to force the investor to buy low and sell high. What if the original allocation was wrong to begin with? How many people will want to maintain their aggressive allocation in the face of a crashing market in 2008? Wall Street experts call this scenario a “falling knife!” Who wants to try to catch the falling knife with their life savings???
Real Intelligence LLC is focused on helping financial advisors deliver human centered financial planning. As such, the Dynamic Mapping method includes an allocation process called “aging” which gradually reduces risk from the purpose-based portfolio as the distribution date nears. All of our savings goals have different timelines. As a result, we suggest each goal have its’ own portfolio and unique risk management timeline. The impact on investors’ confidence is dramatic! Bear markets don’t scare these investors in ANY way!
The Dynamic Mapping app will be available for a free download to everyone in just a few days. Ready to have really important conversations with serious investors? Contact us to discuss how to participate in this unique business model. We will introduce middle-class millionaires to exceptional financial advisors.
Ready to talk?