Unique formula for risk appetite
What risk is your client willing to take? It can be a difficult task for you and your client to properly assess this because not all risks are visually apparent. By integrating AMCET's EPI engine and FinaMetrica's psychometric risk tolerance test, a unique risk profile is created.
No more complicated questionnaire with vague terms
In practice, poorly formulated questions and scenario analyses are often used to determine risk appetite. These scenario analyses are difficult to understand, creating the risk of clients guessing answers. A consequence of guessing is that one does not consider what the question actually means for the downside risk of their assets. As a result, the client's risk appetite may be (much) higher than it is.
By integrating the "EPI-engine" which gives an overview of the asset turnover per stock market climate and per investment strategy , the (downward) risk is visually presented to the client. At a glance, the client can see what risk they may face with their assets.
In addition to the EPI engine, FinaMetrica's psychometric risk tolerance test is also integrated into the software. Twelve questions are used to determine the level of risk the client can live with. In other words: What risk is a client willing to take.
Based on the psychometric risk tolerance test and the Monte Carlos simulations of the EPI engine, the software provides advice on the most appropriate risk profile. The choice of the actual risk profile always remains that of the client in consultation with the asset manager/advisor.
The EPI-engine
The EPI engine makes the risk capacity and the required risk transparent to the client.
The EPI engine performs a Monte-Carlos simulation where investment returns can be calculated for different stock market scenarios. With clear visualizations, the client is shown whether the wealth target can be met and what the most positive and negative scenario is for each stock market climate.
Monte-Carlosimulations are made based on parameters entered by the asset manager. The EPI engine can calculate "what" the value of a parameter should be to achieve a target with a certain certain certainty. This makes it possible to answer complex client questions, such as the examples on the side.
- How long and how much should I invest to reach my goal if I choose to invest rather than save?
- How does the feasibility of my goal change when I set aside €100 each month in an investment account instead of a savings account?
- If I choose offensive investing (high risk), what happens to my assets in the worst case scenario? And in the best case? How is this different from saving or defensive investing?
- How much should I put in extra per month to increase the feasibility of my goal to 80%?
The EPI-engine
The EPI engine makes the risk capacity and the required risk transparent to the client.
The EPI engine performs a Monte-Carlos simulation where investment returns can be calculated for different stock market scenarios. With clear visualizations, the client is shown whether the wealth target can be met and what the most positive and negative scenario is for each stock market climate.
Monte-Carlosimulations are made based on parameters entered by the asset manager. The EPI engine can calculate "what" the value of a parameter should be to achieve a target with a certain certain certainty. This makes it possible to answer complex client questions, such as the examples on the side.
Golden combination
The combination of both objective and subjective risk assessments creates a best practice risk profile. Based on this risk profile, you and your client can determine which investment strategy best suits them.
