System and method for providing financial advice for an investment portfolio

• US 7,860,774 B1
• Filed: 10/31/2003
• Issued: 12/28/2010
• Est. Priority Date: 10/31/2003
• Status: Active Grant

• Current Assignee: Charles Schwab Trust Company (Charles Schwab Corporation)
• Original Assignee: Charles Schwab & Company Incorporated (Charles Schwab Corporation)
• Inventors: Pietranico, Paul-Charles Archimede, Chafkin, Jeremiah Harrison, Peterson, James D.
• Primary Examiner(s): Kramer; James A
• Assistant Examiner(s): WONG, ERIC TAK WAI
• Application Number:
  US10/698,140
• Time in Patent Office: 2,615 Days
• Field of Search: 705/36.R
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A method in a financial advice system for providing specific recommendations regarding the purchase and sale of specific assets for a client'"'"'s portfolio. The method can operate to provide specific reasons for each recommended action, and can provide alternative actions for different purchases and sales. Further, the method allows for accounting for specific client preferences and characteristics. The method also provides a sequential approach of inputting client preferences and characteristics and generating a recommended asset allocation taking into account the client'"'"'s preferences and characteristics. Further, the method can allow for a user to make specific preference indications regarding the purchase and sale of specific assets.

Claims

1. In a financial advisory computer system, a method for providing financial advice, the method including:

receiving a risk tolerance for a client;

receiving preferences for the client wherein the preferences for the client include an identification of specific assets that the client wants to sell or hold;

identifying assets held in the client'"'"'s portfolio;

based on the preferences and the risk tolerance for the client, determining, via a server computer, a recommended asset allocation;

providing a database with ratings for different financial assets;

Identifying one or more assets in the client'"'"'s portfolio that are recommended to be sold;

for each asset of the one or more identified assets recommended to be sold, generating a list of alternative client portfolio assets recommended to be sold instead of the identified asset;

wherein an asset is recommended to be sold based on one of the following criteria;

(1) the asset is recommended to be sold to achieve the recommended asset allocation, (2) the asset is recommended to be sold based on the specific client preferences, (3) the asset is recommended to be sold in order to achieve sector diversification, (4) the asset is recommended to be sold based on a poor rating for the asset in the database, (5) the asset is recommended to be sold in order to reduce concentration in the asset, or (6) the asset is recommended to be sold to realize tax loss harvesting;

generating a plurality of tables wherein each asset of the one or more identified assets recommended to be sold is included in one of the tables, wherein each table corresponds to a reason that identifies the basis for recommending that assets contained in the table be sold, wherein the plurality of tables includes a first table that lists assets to be sold to achieve a recommended asset allocation and a second table that lists assets to be sold due to poor ratings, and wherein the basis correlates to an investment strategy for the client'"'"'s portfolio;

receiving account numbers for a plurality of investment accounts the client has at a particular financial institution;

receiving additional preferences wherein the additional preferences include which of the plurality of accounts are to be included in financial advisory considerations;

identifying assets held in the client'"'"'s portfolio wherein the portfolio includes assets spread across the included accounts; and

recommending placing assets into the included accounts in a tax efficient manner, wherein the tax efficient manner comprises selecting assets with least tax efficiency for purchase in the included accounts that are most tax advantaged.

2. The method of claim 1,

wherein each table contains one or more rows and a plurality of columns, and at least one of the columns indicates a rating from the database wherein the rating corresponds to the asset that corresponds to the row where the rating is provided.

3. The method of claim 1 wherein determining a recommended asset allocation is further based on an underlying target asset allocation corresponding to model portfolios constructed via means-variance optimization.

4. The method of claim 1 wherein the plurality of tables further includes a third table that lists assets to be sold based on a specific client preference.

5. The method of claim 4 wherein the plurality of tables further includes a fourth table that lists assets to be sold in order to achieve sector diversification.

6. The method of claim 5 wherein the plurality of tables further includes a fifth table that lists assets to be sold in order to reduce concentration in the asset.

7. The method of claim 6 wherein the plurality of tables further includes a sixth table that lists assets to be sold to realize tax loss harvesting.

8. The method of claim 7 wherein determining a recommended asset allocation is further based on an underlying target asset allocation corresponding to model portfolios constructed via means-variance optimization.

9. The method of claim 1 wherein determining a recommended asset allocation is performed by the computer system.

10. The method of claim 1 further comprising:

displaying, in each table, columns respectively including a symbol, a quantity to sell, an account number and account type, shares and position value, asset class, and rating.

11. The method of claim 10 wherein the account number and account type column lists taxable and non-taxable accounts.

12. The method of claim 1, wherein the tax efficient manner further comprises selecting assets based on client'"'"'s tax rate for purchase in the included accounts that are most tax advantaged.

13. The method of claim 1,

wherein the plurality of tables further includes one or more rows which correspond to the one or more identified assets recommended to be sold.

14. The method of claim 13,

wherein each row that corresponds to the one or more identified assets recommended to be sold provides an edit field where the client can select the edit field;

in response to the client selecting an edit field in a first row corresponding a first identified asset to be sold, display a group of recommended alternative assets that can be sold in place of the first identified asset.

15. The method of claim 1, wherein the plurality of tables further provides a field which allows the client to obtain more information regarding the basis for recommending that the one or more identified assets in the table be sold.

16. The method of claim 1, wherein the database provides ratings for different mutual funds.