Method and system for financial advising

• US 20050144108A1
• Filed: 12/15/2004
• Published: 06/30/2005
• Est. Priority Date: 11/05/1998
• Status: Active Grant

• Current Assignee: Wealthare Capital Management IP LLC
• Original Assignee: Wealthare Capital Management IP LLC
• Inventors: Loeper, David B.
• Granted Patent: US 7,765,138 B2
• Time in Patent Office: Days
• US Class Current: 705/36.R
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A method of providing financial advice to a client that provides sufficient confidence that their goals will be achieved or exceeded but that avoids excessive sacrifice to the client'"'"'s current or future lifestyle and avoids investment risk that is not needed to provide sufficient confidence of the goals a client personally values. The method comprises obtaining typical client background information, as well as a list of investment goals, and ideal and acceptable values in dollar amounts and timing for each goal. The client is then asked to provide their preferences for each goal on the list compared to each other goal in the list, wherein the client'"'"'s preference is expressed in terms of the price, in money or time, that the client is willing to pay in one goal to achieve another goal or a greater amount or sooner timing of other goals on the list. A matrix can be used to express these value contrasts. A recommendation is then created using the portfolio value, and the client goal preferences and the ideal and acceptable values of goals, by simulating models of the relevant capital markets and investing exclusively in passive investment alternatives to avoid the risk of potential material underperformance of active investments under the premise of avoiding investment risk that is not needed to confidently buy the client the goals they personally value. The recommendation may include a range of portfolio values over their life or time horizon within which the client'"'"'s portfolio should remain in order to ensure the recommendation remains within a “comfort zone”, which represents sufficient confidence that the client'"'"'s goals will be achieved while avoiding excessive current sacrifice. Periodic monitoring of the recommendation is also performed to capture changes to the client'"'"'s goals and actual portfolio values based on the results of the capital markets. Appropriate changes to the recommendation can then be made to ensure that the recommendation remains within the “comfort zone”

Claims

1. A method of financial advising, comprising:

determining an initial value of a client investment portfolio;

obtaining a list of client investment goals, the list including ideal and acceptable values for each of the investment goals, wherein the ideal and acceptable values for each goal correspond to at least one of a dollar amount and a time for achieving the goal;

obtaining a relative value comparison between pairs of investment goals within the list of goals, the relative value comparison being represented in terms of the price, in money or time, that the client is willing to pay in one goal within each pair of investment goals to achieve the other goal in the same pair of investment goals on the list;

electronically simulating a plurality of model investment portfolio allocations using a capital market modeling technique;

using the relative value comparison among the goals and the simulation of the plurality of portfolio allocations to obtain a recommendation comprising an investment allocation and a recommended value for each investment goal, where the recommended value for each goal is not better than the ideal value and not worse than the acceptable value; and

wherein the recommendation has a measured confidence of exceeding the recommended value for each goal; and

communicating the recommendation to the client.

2. The method of claim 1, wherein the portfolio allocations include only passive investments only in order to avoid the possibility that the client investment portfolio will materially underperform the recommended portfolio asset allocation.

3. The method of claim 1, wherein the market modeling technique comprises a Monte Carlo analysis of potential performance.

4. The method of claim 1, wherein the ideal value of each goal is expressed either in terms of a soonest time for achieving the goal or a largest dollar value of the goal;

and the acceptable value of each goal is a smaller dollar value or a later date for achieving that goal compared to the ideal value, and that is still acceptable to the client.

5. The method of claim 1, wherein the step of using the relative value comparison among the goals further comprises determining whether relatively low valued goals can be achieved with only slight modifications to the values of other goals on the list.

6. The method of claim 1, wherein the step of obtaining a relative value comparison among the goals further comprises developing a matrix of the goals that represents the relative comparison between the pairs of investment goals, and the step of using the relative value comparison comprises using the goal matrix to develop the recommendation.

7. The method of claim 1, further comprising:

periodically monitoring the recommendation to determine whether, based on a current value of the client investment portfolio, the recommendation still has sufficient confidence of achieving the recommended set of goals or whether new advice is needed;

determining whether the client would like to add new goals or remove goals from the list of investment goals, or make changes to the relative value contrast among the goals; and

reperforming the simulating, using and communicating steps if the recommendation does not provide sufficient confidence, or has excessive confidence that therefore is subjecting the client to undue sacrifice to their lifestyle, planned lifestyle or excessive investment risk, or if the client has made changes to the relative value comparison among the goals.

8. A method of financial advising, comprising:

determining an initial value of a client investment portfolio;

obtaining a list of client investment goals, the list including ideal and acceptable values for each of the investment goals, wherein the ideal and acceptable values for each goal correspond to at least one of a dollar amount and a time for achieving the goal;

obtaining a relative value comparison between pairs of investment goals within the list of goals, the relative value comparison being represented in terms of the price, in money or time, that the client is willing to pay in one goal within each pair of investment goals to achieve the other goal in the same pair of investment goals on the list;

developing a matrix of the goals that represents the relative comparison between the pairs of investment goals

electronically simulating a plurality of model investment portfolio allocations using a capital market modeling technique;

using the goal matrix and the simulation of the plurality of portfolio allocations to obtain a recommendation comprising an investment allocation and a recommended value for each investment goal, where the recommended value for each goal is not better than the ideal value and not worse than the acceptable value; and

wherein the recommendation has a measured confidence of exceeding the recommended value for each goal; and

communicating the recommendation to the client.

9. The method of claim 8, wherein the portfolio allocations include only passive investments only in order to avoid the possibility that the client investment portfolio will materially underperform the recommended portfolio asset allocation.

10. The method of claim 8, wherein the market modeling technique comprises a Monte Carlo analysis of potential performance.

11. The method of claim 8, wherein the ideal value of each goal is expressed either in terms of a soonest time for achieving the goal or a largest dollar value of the goal;

and the acceptable value of each goal is a smaller dollar value or a later date for achieving that goal compared to the ideal value, and that is still acceptable to the client.

12. The method of claim 8, wherein the step of using the relative value comparison among the goals further comprises determining whether relatively low valued goals can be achieved with only slight modifications to the values of other goals on the list.

13. The method of claim 8, further comprising:

periodically monitoring the recommendation to determine whether, based on a current value of the client investment portfolio, the recommendation still has sufficient confidence of achieving the recommended set of goals or whether new advice is needed; and

reperforming the simulating, using and communicating steps if the recommendation does not provide sufficient confidence, or has excessive confidence that therefore is subjecting the client to undue sacrifice to their lifestyle, planned lifestyle or excessive investment risk.

14. The method of claim 13, wherein the step of periodically monitoring further comprises determining whether the client would like to add new goals or remove goals from the list of investment goals, or make changes to the relative value contrast among the goals;

and the steps of simulating, using and communicating are reperformed if the client has made changes to the relative value comparison among the goals.

15. A method of financial advising, comprising:

determining an initial value of a client investment portfolio;

obtaining a list of client investment goals, the list including ideal and acceptable values for each of the investment goals, wherein the ideal and acceptable values for each goal correspond to at least one of a dollar amount and a time for achieving the goal;

obtaining a relative value comparison between pairs of investment goals within the list of goals, the relative value comparison being represented in terms of the price, in money or time, that the client is willing to pay in one goal within each pair of investment goals to achieve the other goal in the same pair of investment goals on the list;

developing a matrix of the goals that represents the relative comparison between the pairs of investment goals

electronically simulating a plurality of model investment portfolio allocations using a capital market modeling technique; and

using the goal matrix and the simulation of the plurality of portfolio allocations to obtain a recommendation comprising an investment allocation and a recommended value for each investment goal, where the recommended value for each goal is not better than the ideal value and not worse than the acceptable value; and

wherein the recommendation has a measured confidence of exceeding the recommended value for each goal.

16. The method of claim 15, further comprising communicating the recommendation to the client.

17. The method of claim 16, wherein the portfolio allocations include only passive investments only in order to avoid the possibility that the client investment portfolio will materially underperform the recommended portfolio asset allocation.

18. The method of claim 16, wherein the market modeling technique comprises a Monte Carlo analysis of potential performance.

19. The method of claim 16, wherein the ideal value of each goal is expressed either in terms of a soonest time for achieving the goal or a largest dollar value of the goal;

and the acceptable value of each goal is a smaller dollar value or a later date for achieving that goal compared to the ideal value, and that is still acceptable to the client.

20. The method of claim 16, wherein the step of using the relative value comparison among the goals further comprises determining whether relatively low valued goals can be achieved with only slight modifications to the values of other goals on the list.

21. The method of claim 16, further comprising:

periodically monitoring the recommendation to determine whether, based on a current value of the client investment portfolio, the recommendation still has sufficient confidence of achieving the recommended set of goals or whether new advice is needed; and

reperforming the simulating, using and communicating steps if the recommendation does not provide sufficient confidence, or has excessive confidence that therefore is subjecting the client to undue sacrifice to their lifestyle, planned lifestyle or excessive investment risk.

22. The method of claim 21, wherein the step of periodically monitoring further comprises determining whether the client would like to add new goals or remove goals from the list of investment goals, or make changes to the relative value contrast among the goals;

and the steps of simulating, using and communicating are reperformed if the client has made changes to the relative value comparison among the goals.