Yodlee/YNext guest blog: Bringing Once-Exclusive Data to Everyday Investors

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.

 

Read more here.

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