Method and system for financial advising

• US 7,765,138 B2
• Filed: 12/15/2004
• Issued: 07/27/2010
• Est. Priority Date: 11/05/1998
• Status: Expired due to Term

• Current Assignee: Wealthare Capital Management IP LLC
• Original Assignee: Financeware Incorporated
• Inventors: Loeper, David B.
• Primary Examiner(s): Kyle; Charles R
• Assistant Examiner(s): WEIS, SAMUEL
• Application Number:
  US11/014,378
• Publication Number:
  US 20050144108A1
• Time in Patent Office: 2,050 Days
• Field of Search: 705/36.R
• US Class Current: 705/36.00R
• 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. 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.

Claims

1. A method of financial advising, comprising:

determining by a computer an initial value of a client investment portfolio;

obtaining by the computer a list of client investment goals, the list including ideal and acceptable values for each of the investment goals wherein the ideal value of each goal comprises the value for that particular goal that the client most prefers to achieve, and the acceptable value of each goal comprises the value for that particular goal that is less preferable to the client compared to the ideal value but that is still acceptable to the client;

obtaining by the computer a relative value comparison between pairs of investment goals within the list of goals;

simulating by the computer a plurality of model investment portfolio allocations over a predetermined time period using a capital market modeling technique, the simulation accounting for investments and expenditures planned to occur during the predetermined time period;

determining by the computer 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 is determined using the using the relative value comparison, the ideal and acceptable values for each goal, and the simulation of the plurality of portfolio allocations, wherein the recommendation has a measured confidence of exceeding the recommended value for each goal, and wherein the measured confidence is within a predefined range; and

communicating the recommendation to the client.

2. The method of claim 1, wherein the portfolio allocations include only passive investments 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 determining a recommendation using the relative value comparison further comprises determining by the computer whether one or more low valued goals can be achieved with 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 further comprises developing a matrix of the goals that represents the relative comparison between the pairs of investment goals, and the step of determining a recommendation comprises using the goal matrix to develop the recommendation.

7. The method of claim 1, further comprising:

periodically monitoring by the computer the recommendation to determine whether, based on a current value of the client investment portfolio, the recommendation still has sufficient but not excessive confidence of exceeding the recommended set of goals or whether new advice is needed; and

reperforming the simulating, determining, and communicating steps if the recommendation does not provide sufficient confidence, or has excessive confidence.

8. The method of claim 1, further comprising:

determining by the computer 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 comparison; and

reperforming the steps of simulating, determining, and communicating if the client has added or removed goals or made changes to the relative value comparison.

9. The method of claim 1, wherein the measured confidence of exceeding the recommended value for each goal is determined by calculating a percentage of a plurality of different simulations in which the recommended value for each goal is exceeded.

10. The method of claim 9, further comprising:

comparing by the computer the calculated percentage of the plurality of different simulations in which the recommended value for each goal is exceeded to a predetermined comfort zone to determine if the calculated percentage falls within the comfort zone, the comfort zone representing a range of confidence that is neither excessive nor insufficient.

11. The method of claim 1, 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.

12. The method of claim 1, further comprising:

periodically monitoring by the computer the recommendation to determine whether, based on a current value of the client investment portfolio, the measured confidence is still within the predefined range; and

re-performing by the computer the simulating and determining steps if the measured confidence is not still within the predefined range.

13. A device for financial advising comprising:

a processor configured for determining an initial value of a client investment portfolio;

the processor further configured for obtaining a list of client investment goals, the list including ideal and acceptable values for each of the investment goals wherein the ideal value of each goal comprises the value for that particular goal that the client most prefers to achieve, and the acceptable value of each goal comprises the value for that particular goal that is less preferable to the client compared to the ideal value but that is still acceptable to the client;

the processor further configured for obtaining a relative value comparison between pairs of investment goals within the list of goals;

the processor further configured for simulating a plurality of model investment portfolio allocations over a predetermined time period using a capital market modeling technique, the simulation accounting for investments and expenditures planned to occur during the predetermined time period;

the processor further configured for determining 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 is determined using the using the relative value comparison, the ideal and acceptable values for each goal, and the simulation of the plurality of portfolio allocations, wherein the recommendation has a measured confidence of exceeding the recommended value for each goal, and wherein the measured confidence is within a predefined range; and

the processor further configured for communicating the recommendation to the client.

14. The device of claim 13, wherein the portfolio allocations include only passive investments in order to avoid the possibility that the client investment portfolio will materially underperform the recommended portfolio asset allocation.

15. The device of claim 13, wherein the market modeling technique comprises a Monte Carlo analysis of potential performance.

16. The device of claim 13, 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.

17. The device of claim 13, wherein the processor provides a recommendation using the relative value comparison by further determining whether one or more low valued goals can be achieved with modifications to the values of other goals on the list.

18. The device of claim 13, wherein the processor is further configured for developing a matrix of the goals that represents the relative comparison between the pairs of investment goals, and wherein the processor provides the recommendation further using the goal matrix to develop the recommendation.

19. The device of claim 13, wherein the processor is further configured for periodically monitoring the recommendation to determine whether, based on a current value of the client investment portfolio, the recommendation still has sufficient but not excessive confidence of exceeding the recommended set of goals or whether new advice is needed;

and

wherein the processor is further configured for reperforming the simulating, determining, and communicating steps if the recommendation does not provide sufficient confidence, or has excessive confidence.

20. The device of claim 13, wherein the processor is further configured for determining the measured confidence of exceeding the recommended value for each goal by calculating a percentage of a plurality of different simulations in which the recommended value for each goal is exceeded.

21. The device of claim 20, wherein the processor is further configured for comparing the calculated percentage of the plurality of different simulations in which the recommended value for each goal is exceeded to a predetermined comfort zone to determine if the calculated percentage falls within the comfort zone, the comfort zone representing a range of confidence that is neither excessive nor insufficient.

22. The device of claim 13, 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.

23. The device of claim 13, wherein the processor is further configured for periodically monitoring the recommendation to determine whether, based on a current value of the client investment portfolio, the measured confidence is still within the predefined range;

and wherein the processor is further configured for re-performing the simulating and determining steps if the measured confidence is not still within the predefined range.

24. The device of claim 13, wherein the processor is further configured for 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 comparison;

and

wherein the processor is further configured for reperforming the simulating, determining, and communicating steps if the client has added or removed goals or made changes to the relative value comparison.

25. A computer-readable storage medium having computer-readable program code for financial advising stored therein, the computer-readable program code comprising:

computer-usable program code for determining an initial value of a client investment portfolio;

computer-usable program code for obtaining a list of client investment goals, the list including ideal and acceptable values for each of the investment goals wherein the ideal value of each goal comprises the value for that particular goal that the client most prefers to achieve and the acceptable value of each goal comprises the value for that particular goal that is less preferable to the client compared to the ideal value but that is still acceptable to the client;

computer-usable program code for obtaining a relative value comparison between pairs of investment goals within the list of goals;

computer-usable program code for simulating a plurality of model investment portfolio allocations over a predetermined time period using a capital market modeling technique, the simulation accounting for investments and expenditures planned to occur during the predetermined time period;

computer-usable program code for, using the relative value comparison, the ideal and acceptable values for each goal, and the simulation of the plurality of portfolio allocations, determining 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, and wherein the measured confidence is within a predefined range; and

computer-usable program code for communicating the recommendation to the client.

26. The computer-readable storage medium of claim 25, wherein the portfolio allocations include only passive investments in order to avoid the possibility that the client investment portfolio will materially underperform the recommended portfolio asset allocation.

27. The computer-readable storage medium of claim 25, wherein the market modeling technique comprises a Monte Carlo analysis of potential performance.

28. The computer-readable storage medium of claim 25, 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.

29. The computer-readable storage medium of claim 25, further comprising:

computer-usable program code for determining whether one or more low valued goals can be achieved with modifications to the values of other goals on the list.

30. The computer-readable storage medium of claim 25, further comprising:

computer-usable program code for developing a matrix of the goals that represents the relative comparison between the pairs of investment goals;

wherein the computer-usable program code for determining a recommendation using the relative value comparison further uses the goal matrix to develop the recommendation.

31. The computer-readable storage medium of claim 25, further comprising:

computer-usable program code for periodically monitoring the recommendation to determine whether, based on a current value of the client investment portfolio, the recommendation still has sufficient but not excessive confidence of exceeding the recommended set of goals or whether new advice is needed;

and

computer-usable program code for reperforming the simulating, determining, and communicating steps if the recommendation does not provide sufficient confidence, or has excessive confidence.

32. The computer-readable storage medium of claim 25, wherein the computer-usable program code determines the measured confidence of exceeding the recommended value for each goal by calculating a percentage of a plurality of different simulations in which the recommended value for each goal is exceeded.

33. The computer-readable storage medium of claim 32, further comprising:

computer-usable program code for comparing the calculated percentage of the plurality of different simulations in which the recommended value for each goal is exceeded to a predetermined comfort zone to determine if the calculated percentage falls within the comfort zone, the comfort zone representing a range of confidence that is neither excessive nor insufficient.

34. The computer-readable storage medium of claim 25, 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.

35. The computer-readable storage medium of claim 25, further comprising:

computer-usable program code for periodically monitoring the recommendation to determine whether, based on a current value of the client investment portfolio, the measured confidence is still within the predefined range; and

computer-usable program code for re-performing the simulating and determining steps if the measured confidence is not still within the predefined range.

36. The computer-readable storage medium of claim 25, further comprising:

computer-usable program code for 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 comparison; and

computer-usable program code for reperforming the simulating, determining, and communicating steps if the client has added or removed goals or made changes to the relative value comparison.