The following guest post comes from Min Zhang, Co-Founder of Totum, which offers holistic and bespoke wealth analytics for financial advisors. Learn more at www.totumwealth.com. We look at it this way: It’s easy to lead an informed life today. We can track how many steps we take, compare reviews and prices on almost anything before buying, and know a lot about a person before meeting up. When it comes to managing our wealth, however, the metrics we need to answer critical questions are often hard to produce, even for financial advisors. In our prior careers, Totum co-founder Mark Cone and I worked extensively with the world’s largest and most sophisticated institutional investors. We noticed that the most successful ones had an extremely granular understanding of the risks they were taking. Their access to in-depth risk metrics gives them a leg up in allowing these plans to target their requirements and mitigate specific risks. Why don’t individuals invest like that? The cost, access and resources required for such a thorough approach are simply prohibitive for individual investors and most independent wealth managers. For example, PIMCO’s solution study service is only available to its larger clients. The proprietary analytics engine PIRANHA took legions of quants and engineers years to build, and is not accessible by clients directly. BlackRock’s Aladdin is even more powerful if you can afford the price tag of several million dollars per year. In the real world, most Registered Investment Advisors can only window-shop these sorts of risk analytics. While advisors at larger firms have more resources, many still struggle daily with legacy tools that ask boilerplate risk tolerance questions clients can’t answer and produce bulky reports that don’t address clients’ key concerns. With the limited tools most advisors have at their disposal, how do they stay relevant and competitive in a time when trading and investment advice are essentially free and accessible for all? While robo-advisors cannot yet address the more complex aspects of investment needs and most clients still want the human touch, as a side effect of lowering the barrier to access investment advice, robo-advisors are providing a cheaper option for the “core portfolio,” often the lion’s share of a client’s assets. Advisors understand these “Robo-nomics” and are growingly concerned about how to attract a new generation of clients. According to the TD Ameritrade Institutional RIA Sentiment Survey released recently, the transfer of wealth from aging clients to the next generation of investors topped advisors’ concerns for the first time, followed by investors choosing to manage their own finances online. The quality and level of service this new generation of clients demand is also higher, with users expecting on-demand service to make data-driven decisions. We created Totum to give the guardians of trillions better tools so they can maximize their human touch and improve service for clients today. We choose to help financial fiduciaries first as we see them as the most effective agents of change. Investors want to understand the risks in their lives, be involved in making informed decisions, and stay in control of where their money is going. That’s what we hope to do with Totum. Totum applies the latest technology and architecture to empower a completely new way of thinking about risk – the comprehensive human capital factors as well as institutional-quality analytics that deliver an interactive and engaging investment process for both the advisor and the client. The overall approach is diagnostic and consultative, creating an on-going solution rather than a one-sided, one-time pitch. We bring innovation to a proven engagement method that can be time-consuming to deploy without the right tools. At Totum, value to our customers and user experience are our top priorities. Guided by these principals, we chose our data partners carefully. One of those partners, Yodlee, empowers seamless aggregation of accounts and holdings to facilitate our holistic risk assessment and portfolio comparison.
