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What We Offer
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Making financial decisions is challenging but being a financial advisor is even more challenging.
To understand a clients needs and their decision making process is vital. To know the clients
life situation allows an advisor to identify the clients needs, but what about their decision making
process?
How investors make decisions varies across cultures, genders, and especially on an individual basis.
Decisions depend on how the investor perceives and defines gains, losses, and risk. These variables
can be identified and gathered into a unique investor risk profile, which match with an
optimal asset allocation. With the principals of behavioural finance, Behavioural Finance Solutions
works with you to develop and then implement a systematic investor profiling method.
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Products
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Investor Questionnaire
In this first step a custom questionnaire is built that fits your advisory process and your clients.
Each questionnaire is made to identify the preferences and biases of your clients. The questions are
made to identify loss aversion, risk preference, risk awareness, reference point, and other critical
factors. Once we decide with you what the questions will ask, we consider how to ask the questions.
This is to insure that the questions are best understood, the responses most accurate, and
that the questions can be best implemented in your client advisory process.
Profile Building
The strength in a BhFS client risk profile is in how we optimally utilize the gathered information.
The questionnaire results are inputted into a model which calculates the investor’s definition of
gains, losses, and risks. A function is built which represents the investor’s decision making process.
The model is state-of-the-art and reflects 50 years of advances in finance. The benefits are
consistent, and the risk profiles significantly more accurate.
Portfolio Construction
See a portfolio the way your client does. Using a risk measure which does not match the
client’s essential understanding of risk would lead to investment decisions which are
suboptimal in the client’s point of view. Investors tend to be loss-averse rather than
volatility-averse. They also tend to see gains and losses with regard to a reference point
rather than in absolute terms. What level of ‘risk’ is your client content with, what asset
mix will give him the most satisfaction? Behavioural finance identifies how investors see
and evaluate their portfolios. With the application of behavioural finance portfolios can
be built which gives the most satisfaction.
Interdependence - Client, Advisor, Bank
Collecting accurate and relevant information from the client is essential in the client
advisory process, but only a part. The effectiveness of the advisory process depends on the
interaction between bank, advisor, and client. Important aspects
are the reporting
frequency, content, and format. A second aspect would be to consider the extent of the
advisors discretion in selecting a client portfolio. These two aspects, and others, have
a significant impact on your client's satisfaction. BHFS is positioned to specially optimize
your client advisory process.
Quality Test
Slight differences in the form of a question can easily have unintended interpretations and
lead the investor astray. If specific questions not generated by BhFS are desired, this stage
is necessary to ensure that the questionnaire is understood and the desired information is obtained.
We can test the rigor of the questionnaire in our lab without risk of confusing clients.
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Consulting
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BhFS bridges the needs of the financial sector and the vast body of innovative academic
knowledge in finance. Experts in the fields of behavioural finance, stochastic systems,
financial economics, evolutionary finance, quantitative finance, and operations research are
accessible.
We particularly apply behavioural finance in the client advisory process. Our leading expertise
gives us the ability to explain why and in which ways people deviate from the paradigm of
rational decision making. BhFS is positioned to serve the financial sector in two main
areas:
- Private Banking: To create an investment process where the
dissonance between the decisions investors intend to take, and those they do take is minimized. This
allows investment goals to be reached, and investors satisfied.
- Product Development: To design structured products that
are best suited to serve the needs of private investors.
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Presentations
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At BhFS we give popular introductions to behavioural finance, and other areas of finance.
As part of our advisory services, we explain key behavioural finance concepts, especially
in the context of their application through our services. More in depth presentations to
upper management are also available.
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We Provide...
Client Understanding
Client Satisfaction
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