METHOD AND SYSTEM FOR FINANCIAL ADVISING
First Claim
1. A method of financial advising comprising:
- obtaining a client investment goal including ideal and acceptable values for the investment goal;
performing a first simulation of a plurality of model investment portfolio allocations using a capital market modeling technique;
using the first simulation of the plurality of portfolio allocations to obtain a recommendation comprising an investment allocation and a recommended value for the investment goal, wherein the recommended value is not better than the ideal value and not worse than the acceptable value;
performing a second simulation of the recommended investment allocation over a predetermined time period using a capital market modeling technique; and
using the second simulation of the recommended investment allocation to obtain an estimated chance that the recommended investment allocation will result in a value better than the ideal value or worse than the acceptable value at the end of the predetermined time period
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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 die recommendation remains within the “comfort zone”
112 Citations
18 Claims
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1. A method of financial advising comprising:
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obtaining a client investment goal including ideal and acceptable values for the investment goal;
performing a first simulation of a plurality of model investment portfolio allocations using a capital market modeling technique;
using the first simulation of the plurality of portfolio allocations to obtain a recommendation comprising an investment allocation and a recommended value for the investment goal, wherein the recommended value is not better than the ideal value and not worse than the acceptable value;
performing a second simulation of the recommended investment allocation over a predetermined time period using a capital market modeling technique; and
using the second simulation of the recommended investment allocation to obtain an estimated chance that the recommended investment allocation will result in a value better than the ideal value or worse than the acceptable value at the end of the predetermined time period - View Dependent Claims (2, 3, 4, 5, 6)
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7. A method of financial advising, comprising:
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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;
wherein the recommendation has a measured confidence of exceeding the recommended value for each goal;
performing a second electronic simulation of the recommended investment allocation over a predetermined time period using a capital market modeling technique;
using the second simulation of the recommended investment allocation to obtain an estimated chance that the recommended investment allocation will result in a value better than the ideal value or less than the acceptable value at the end of the predetermined time period; and
communicating the recommended investment allocation and estimated chance to the client. - View Dependent Claims (8, 9, 10, 11, 12, 13)
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14. A method of financial advising comprising:
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obtaining a client targeted end date and targeted end investment portfolio value;
obtaining one or more client investment goals, and for each goal, identifying ideal and acceptable values, 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;
electronically simulating a plurality of model investment portfolio allocations using a capital market modeling technique that comprises a reverse iteration algorithm;
using the simulation 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. - View Dependent Claims (15, 16, 17, 18)
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Specification