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The world of Digital Lessons from Adjunct industries

THE WORLD OF DIGITAL MANY PROMISES…

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MANY THREATS…

Digital is Change

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Change can be an

Opportunity

Change can be an

Threat

Understanding the

Anatomy of Digital Change

Payments

Micro Payments

PayPal

Lending

Lending Club

P2P Lending

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Opportunity is to be able to serve micro markets

SO, WHAT COULD IT MEAN FOR

INVESTMENTS ?

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MOVING FROM MACRO TO

MICRO INVESTMENT

THE PROMISE OF

NEW MARKETS A journey of limitless possibilities

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THE THREAT

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Threat is micro players having access to large markets

REMEMBER… • The word ‘Travel Agent?’

• Or Shopping before Amazon ?

• Or hotels before Air BnB

• Or cabs before Uber

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DISINTERMEDIATION FLYING OVER THE MIDDLE LAYER

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POSSIBLE FUTURE FOR WEALTH

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NEW MARKETS

FROM Wealth Management TO RETURNS MANAGEMENT

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New Channels FROM RELATIONSHIP MANAGERS

TO IFA NETWORKS

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COULD FINANCIAL INSTITUTIONS GET

DIS-INTERMEDIATED? Is Uber Wealth Possible ?

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WHAT IF IFA HAD A

DIGITAL TOOL KIT ?

What if an Investor could CREATE his own portfolio?

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• What if an Investor could set his own Goals ? • What if an Investor could set a Risk profile to his Goals ? • What if an Investor had access to a Pre-defined Model

Portfolio ? • What if an Investor could self assign a Model portfolio

to each of his goals ? • What if an Investor could define his own constraints on

each portfolio ?

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Investment Planning by Client Goal Capture by Client

Capture client’s income, expenses, assets, liabilities and financial goals

Recommended portfolio vs. actual portfolio

Investment Plan to be implemented

What if an Investor could REFINE his own portfolio?

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• What if an Investor could project Portfolio’s Returns – Average , Maximum and Minimum ?

• What if an Investor could change the allocation amongst Asset classes, amongst sub-Asset classes, amongst securities AND then project the returns ?

• What if an Investor could change the expected return from each Asset-class, Asset sub-class, Security AND then project the returns

• What if an Investor could change the Volatility for each Asset Class, Asset Sub-class, Security AND then project the returns

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Simulation using Monte-Carlo Simulation using Backtesting

Performance measures from Backtesting – Standard Deviation, Absolute returns, VaR

Simulate across parameters – allocation, mean, volatility to project Minimum, Maximum, Average returns

What if an Investor could TRACK the PERFORMANCE of his Portfolio?

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• What if an Investor could evaluate his Portfolio performance against his Goals ?

• What if an in Investor could be advised how much likely longer before he meets his goals ?

• What if the Investor could see his Realized, Unrealized and Total gains, daily ?

• What if the Investor could see his gains by his preferred method – FIFO or average unit cost ?

• What if an Investor could see Absolute gain, Annualized gain, dollar weighted gain or risk weighted gain ?

• What if an investor could see Value at Risk ?

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Performance Measures of Client’s Portfolio

Anytime anywhere access to portfolio performance

Performance measures of client portfolio – Sharpe Ration, Jensen’s Alpha, Treynor Ratio, VaR

Security level returns of client portfolio – investment amount, market value, unrealized gain/ loss

What if an Investor could ANALYZE his Portfolio Performance ?

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• What if an investor could isolate the market movement attribution to portfolio performance ?

• What if an investor could isolate the security selection attribution to portfolio performance ?

• What if an investor could isolate the market timing attribution to portfolio performance ?

• What if the investor could be alerted in real time on divergence between model portfolio and actual portfolio

• What of an investor could back- test various model portfolios ?

• What if an investor could create his own model portfolio ?

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Model Portfolio Creation – Till Security Level

Attribution Analysis

Attribution analysis based on Asset Allocation, Stock Allocation, Stock Selection

Security parameters to aid selection – 1 year/ 6 months returns, volatility, investment recommendation, risk profile….

What if an investor can be PROTECTED from himself?

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• What if Pre-trade compliances can enforce asset allocation checks?

• What if Pre-trade compliance can enforce concentration checks ?

• What if Pre-trade compliances can enforce risk-profile related checks ?

• What if Pre-trade compliances can enforce bank policies • What if Pre-trade compliances can enforce regulators

policies • What if post-trade compliance violations can be linked

to alerts

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Deviation Tracking Rebalancing the portfolio

Model vs. Actual portfolio deviations at Asset, Sub-asset, Security Level

Rebalancing recommendations for buy/ sell at security level

What if an Independent Financial Advisor could do all of that?

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• What if an IFA could provide the same portfolio tracking as a Financial institute ?

• What if an IFA could build his own Model Portfolio ? • What if an IFA could have more intelligent conversation

with his customer ?

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• Gen-Y wants control of finances. • Gen-Y wants to have a connection with their money. • Gen-Y wants to understand and question the advice.

What if the Gen-Y customers preferred the IFA model? 7

What if an Investor could choose from multiple products for investment?

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• What if an investor could choose from a range of products to invest – • UITFs/ Mutual Funds • Equities • Fixed Income • Deposits

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WHAT IF AN UBER WEALTH WAS BEING BORN …

Is DISRUPTION

Our Fate 35

EVOLUTION or

DISRUPTION 36

If the change rides you,

it is a DISRUPTION

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If you ride the change,

it is EVOLUTION

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WHAT IF YOU CAN BE THE UBER OF WEALTH ?

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THE BIG PRODUCTIVITY CHALLENGE

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How does one service a larger number of clients & yet be a Trusted Advisor ?

WHAT IF THE RELATIONSHIP MANAGER COULD HAVE

THE SAME SYSTEM ?

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What if an Investor could also choose from ….

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• What if an investor also had the option to choose from a wider range of products to invest – • International Equities, Bonds and Mutual Funds • Private Equity • Forex • Derivatives • Structured Products • Commodities • Insurance • Art • Real Estate etc.

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What if an Investor could view all products in a single system?

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Multi-product client portfolio

Intercept the future BE THE DISRUPTOR

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www.intellectdesign.com atul.mishra@intellectdesign.com