Advisors know that private wealth management is an increasingly competitive market. And while all advisors in the field should act as responsible fiduciaries by minimizing fiduciary risk, not all do.
As an advisor, this leaves you with two challenges. First, minimizing fiduciary risk in all portfolios, and second, demonstrating this minimized risk to clients and prospective clients. While that might sound daunting, with the right technology, it’s entirely possible.
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In the modern world of investment management, it is no surprise that advisors can leverage technology platforms to expand, service, and retain their client bases. It might, however, be a surprise that with the right platform, it is possible to quantify and minimize exposure to fiduciary risk for clients.
Magnifi, which offers the first natural language driven search platform for investment advisors, has partnered with fiduciary risk firm Fi360 to enable advisors to easily predict, quantify, and reduce risk in their clients’ portfolios. This is invaluable information for you, your clients, and your business.
Here’s how Magnifi’s platform and fiduciary risk features can help both you and your clients succeed beyond expectations.
Why Fiduciary Risk Matters
Fiduciary risk is an important component of portfolio management for the modern advisor.
A fiduciary “is a person or legal entity, such as a bank or brokerage firm, that has the power and responsibility of acting for another (usually called the beneficiary or principal) in situations requiring total trust, good faith and honesty.”
In other words, clients pay their financial advisors a fee for advice and services, which should be rendered in the most appropriate way for the benefit of the client.
Fiduciary risk is “the risk that may be responsible for a trustee or other fiduciary not performing their duties or achieving the best value with relation to the best of the beneficiary’s interests.”
An example of this is a fund manager making excessive trades for a client’s portfolio, thereby incurring transaction costs that affects client gains. Minimizing fiduciary risk is important for clients and financial managers alike. Not only is it a crucial consideration when developing client portfolios, it demonstrates a comprehensive understanding of investment selections and their impacts.
The Fi360 Solution
Fi360 is a leading provider of training and certification on prudent fiduciary practices designed to help financial service providers more effectively grow client portfolios. Fi360 scores investments based on their fiduciary risk for client specific strategies, identifying investments that align specifically with a client’s strategies.
How is this score determined? The Fi360 Fiduciary Score® is a peer percentile ranking of an investment against a set of quantitative due diligence criteria selected to reflect prudent fiduciary management. The score is calculated monthly for investments with at least a three-year history. Fi360’s Scores consider regulatory oversight, minimum track record, stability of the organization, assets in the investment, composition consistent with asset class, style consistency, expense ratios/ fees, risk adjusted performance relative to peers, and performance relative to peers.
Magnifi’s platform incorporates Fi360 Scores, producing a comprehensive proposal for client review. These reports clearly demonstrate how the advisor arrived at a particular selection of funds based on client-specific criteria and projected performance, boosting both manager and client confidence and long-term success.
In addition to helping advisors to build new and expand existing portfolios, Magnifi’s platform can help to make any portfolio better. For example, Magnifi’s Enhancer feature, which incorporates Fi360 Scores, assesses existing portfolio holdings, and offers comparable alternative investment options that more strategically engage clients in each fund or theme in the portfolio by limiting fiduciary risk. The Enhancer helps advisors to clearly show existing or prospective clients the potential for improvements to their portfolios. This clear and concise process is a feature that could potentially help advisors attract new clients and retain existing clients.
Magnifi’s comprehensive reports on portfolio assessments include projected calendar year returns, upside-downside capture, correlation matrix, factor exposures, and provides for a final investment score and data driven recommendations. These reports are customizable (they can include the management firm’s logo, for example) and incorporate summaries and detailed breakouts of allocation options, detailing the anticipated effects of various investment configurations.
No matter how well your firm is faring in the current economic client, there is always room to make your process smarter, smoother, and easier to communicate to your clients. Know your value and your performance impact by adding Magnifi’s Fi360 scores to your arsenal of client management tools today.
Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Try it for yourself today.
This blog is sponsored by Magnifi. The information and data are as of the publish date unless otherwise noted and subject to change. This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. [As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide brokerage or custody services.
