In this Capstone project, you will have to choose between three different characters (each with a unique set of financial constraints and objectives) and design an appropriate wealth plan for them over the next 5 years. You will have to use the knowledge you gained in each of the four preceding courses to reach that objective. Indeed, you will need to know which assets to consider and how to manage them depending on changes in the economic outlook (Course 1), how to evaluate and deal with your character's emotional biases in order to suggest them a wealth strategy they will be able to follow (Course 2), how to build an optimal portfolio and manage its risk once the strategy has been designed (Course 3) and how to adequately measure the performance of your plan while taking advantage of investment vehicles and future trends in the investment management industry to further your character's goals (Course 4). This Capstone project was designed in collaboration with UBS, our corporate partner, who benefits from years of experience in guiding clients with their wealth planning.
How our age and wealth affect our investment profile - Robo-advisors
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來自 University of Geneva 的課程
Planning your Client's Wealth over a 5-year Horizon
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Client Profile
與講師見面
University of Geneva- Michel GirardinLecturer in Macro-Finance - Project Leader for the "Investment Management" specialization
Geneva Finance Research Institute
[MUSIC]
Okay.
So you may want, and indeed it's quite a strong trend nowadays to go for
robo-advisors, so I did the experiment.
And I went to one leading firm in terms of robo advising,
and for the strategic asset allocation.
And basically, I was given roughly ten questions, and
I answered them, and the output was a recommended asset allocation.
So I'm going to show you here four sets of answers because I had obviously
an idea when I went on the website and answered the questions.
And I will show you a couple of simulations and
you will see what the impact of age and wealth is for the robot.
So called Simulation 1, go for high returns, go for
high octane, so, on the website I was asked how old I was.
I cheated a little bit and I said I'm 49.
What do you mean I cheated?
I didn't cheat, it's 49, okay?
I was asked my revenue, so I said $100,000.
Okay.
Wealth half a million.
Comes interesting.
Right? Objective,
what is your objective as an investor, I said I shoot for maximum gains.
Okay.
And just to double check whether I really am that kind of aggressive
type of investor.
Decides the robot asks me, what would you do if the market fell by 10%?
Then poof, right back, I hit and I say, I'd buy more.
Okay, so once I give all these answers to the robot,
he comes back and gives me this asset allocation.
You see bonds, 13%,
TIPS, we mentioned that, those are treasury inflation-protected securities,
or also bonds that hedge against the inflation risk.
And we also have so-called high-yielding bonds, or
less quality, therefore more yield, more income.
And you see a total allocation to fixed income of 21%.
Or a total allocation to risky assets of the rest to a hundred, or 79%.
So I did the second set of answers and I called this Simulation 2,
ain't it risky, isn't it risky okay, so, I'm still 49, okay.
Yes I'm 49.
I still have $100,000 as revenue.
I still have $500,000 as wealth.
But I'm not that kind of risk-lover person.
I'm actually quite risk-averse, okay.
So, here I made an objective.
I say I want to minimize losses.
And just to make sure, what do you do if the market tumbles 10%?
I sell all.
I get rid of all my risky investment.
The robo understands what kind of investor I am, and
you see here he gives me an allocation of 35, 6, 8.
Of these various categories of bonds for
a total of 49% in bonds, or just 51% in equity.
So far so good, Simulation 1, I want high returns,
I have to accept more risk or a greater allocation to risky assets.
Simulation 2, I don't like risks so I will have more risk less or
less risky assets like fixed income.
And now comes the influence of age and wealth.
Wealth first, all right.
So Simulation 3 is actually, what, I'm Swiss.
Swiss can be, not the only ones, but can be quite wealthy right?
So I'm still 49 and I still make $100,000.
That's just pocket money.
4, I have a wealth of $50 million.
Now, you're talking, right.
50 million, wow.
Okay, what is your objective?
Well I, maximum gains, I still want to make more money.
I'm rich, but I want to make money, hence if the market tumbles 10%, I buy more.
All right.
Now if we know, if we believe in market efficiency and
if we're all our work or more economicals, I should be
getting the same allocation as when I said I only had half a million worth.
Right? The wealth should not impact my
asset allocation.
Now let's see what the robot has to say to this.
And you here the various allocations.
6% to bonds, 10% to high yield bonds 16% only to fixed income assets.
And plus the composition of these fixed income assets has
changed dramatically from Simulation 1,
because here you see you have very few of the risk free, shall we say or
very low risky bonds and a higher proportion of high yield bonds.
So with Simulation 3 here we have a very high allocation to risky assets of 84%.
Okay and last but not least, let;s have a look at the impact of age.
On the asset allocation according to the robo-advisers.
So basically, I went on the side and gave my true age, it's not 49 alas,
but if we combine my wealth with Simulation 3 you might actually,
some people might actually be more interested throughout and
behave my age of 88, right, 88.
$100,000 is still my income but and
I also have actually I only have half a million, sorry.
Wealth and I want to minimize losses.
So, Simulation 4 has to be compared with Simulation 2, and
normally if age does not impact our asset allocation because again,
market efficiency and [INAUDIBLE] and all that.
Well you see here it does change and quite dramatically.
So, for the fixed income allocation, it jumps from 49 to 75%.
So here it's quite funny because this robo-advisor
actually Is a firm which believes in market efficiency.
So they don't come with active funds they actually only promote passive investments.
But they have this influences of age and
wealth, which would make you think that it's actually more
in the active asset allocation camp, or
the camp of those who do not adhere strictly to market efficiency or
more economic risks.
So in conclusion, we saw with these two sets of videos that both our age and
our wealth do matter when we have to take decisions for
our strategic asset allocation.
The wealthier we are, the less risk averse we tend to be and
the older we get, the more risk averse it will become.
Okay.
And last but not least,
we saw that robo-advisors actually also do take into account age and
wealth when shaping the strategic asset allocation procedure
[MUSIC]
