Tuesday Tips helps financial services firms improve a key aspect of their online user experience. Recommendations are taken directly from our Monitor Reports and Consulting Services research, which cover banking, brokerage, credit cards, asset management, retirement, annuities and insurance
For the average investor, portfolio diversification is necessary to protect wealth from market swings. An essential part of portfolio management is allocating assets amongst different investments that carry different levels of risk. To help clients handle the task, online brokerages provide asset allocation tools that help clients determine a target asset allocation model, and then compare their current holdings to the target.
The following five tips are taken from our recent E-Monitor report, Asset Allocation Tools: Helping Clients Diversify Their Portfolios, and focus on ways brokerages can improve the asset allocation and portfolio allocation tools they offer prospects and clients online:
#1 Offer an Online Investor Profile Questionnaire and Target Allocation Model – Providing a questionnaire and pre-defined target allocation models gives clients the flexibility to choose their own target portfolios or determine an appropriate portfolio allocation. A basic questionnaire provides a simple format for identifying and quantifying a client’s risk aversion, investing objective and time horizon, goals and experience. The questionnaire yields a target asset allocation model to match those needs. As an added benefit, firms should provide clients with the opportunity to select from pre-defined allocation models or create a custom mode. Vanguard’s Portfolio Watch includes all three options – an Investor Questionnaire, pre-established model portfolios and the option to create a custom mix.
Vanguard Model Portfolio and Custom Asset Mix Option
#3 Recommend Helpful, Actionable Investments – The most helpful asset allocation tools prescribe specific investments and strategies relative to the client’s analysis. While juxtaposing a client’s target portfolio against their existing portfolio is helpful for identifying investment imbalances and portfolio weaknesses, the most successful asset allocation tools also name specific, actionable investments to fulfill those goals. For example, ShareBuilder’s PortfolioBuilder utility recommends specific ETF investments by name in order to satisfy client investment preferences and portfolio balances.
Specific Investment Recommendations from ShareBuilder’s PortfolioBuilder
TD Ameritrade’s Asset Allocation Tool Trade Features