You can use Portfolio Health Check to visualize portfolio performance in the context of market dynamics. You can access it from the top left menu:
Using Portfolio Health Check to Convert Prospects
Portfolio Health Check provides an efficient frontier visualization. Each mini pie chart represents a model portfolio in your firm's model set, forming an efficient frontier.
There are two ways to assess the portfolio's performance:
1. Theoretical Efficient Frontier: This is based on capital market (target return and target volatility), making it ideal for planning purposes with a longer time horizon.
2. Real-Time Efficient Frontier: Based on actual risk and return for a specified time period.
You can choose to aggregate the portfolio at the Household level or the Account level:
Household Level: Aggregates all client portfolios into one, providing an overview of the entire household's portfolio.
Account Level: Shows the performance of each portfolio separately.
Monitoring Portfolio Performance
In the chart below, the vertical blue bar indicates the investor's risk tolerance level from the selected Model in the Household Level Target Asset Allocation.
The solid green circle represents the actual risk and return of prospect's existing portfolio for the specified time period. In this case, you can see the portfolio has higher risk comparing to the investor's risk tolerance, and it is below the efficient frontier. This is one way of demonstrating your value.
The green circle indicates the actual risk and return of the proposed portfolio in the target asset allocation.
Note that the models typically deviate from their respective "normal" position. You can check on "Theoretical Efficient Frontier" to compare (see chart below for an example).
Monitoring Financial Crisis
This is also a powerful tool to have in-depth conversation during financial crisis.
The chart below shows what the market looked like during the three months ending 2024/03/01. You can see that all models shifted to the lower right, indicating much higher risk and negative returns.
This is how you can have the conversation with a panicking client:
1. First show them the 1-month chart, that you understand why they are nervous. You are staying on top of it and this chart shows that you understand it better than them (they can't see a chart like this elsewhere).
2. Then you show them slightly longer terms, 3-month, 6-month, 1-year, 3-year. It is almost inevitably less and less scary.
3. You will then show them the recovery by changing the end date to April, May, etc. to show how strong the recovery is, and it is something nobody could have predicted.
You can revisit the emotions chart in the IPS. If this client has taken the Investor Type and Loss Aversion mini-questionnaires, it is the perfect time to revisit the key points.