Goal Based Direct Indexing

"Goal Based Investing is all about efficiently spending investors’ dollar and risk budgets via dynamic asset allocation strategies specifically designed to help them secure their essential goals (regardless of fluctuations in the stock market and interest rates) while maximizing the chances that they reach their aspirational goals …"
Prof. Lionel Martellini
Factor investing and Goal-Based Investing Pioneer

HERE ARE A FEW BILLION REASONS TO TRUST US ...

We act as the sub-advisor on your client’s account, which is always held at a FINRA regulated broker-dealer and qualified custodian, and your investments are protected by the SIPC up to $500,000. For details, please see www.sipc.org.

We take security seriously, and your personal information is fully encrypted and securely stored.

And, we have been designing portfolios for large institutions since 2013 …

Direct Indexing can deliver Goal Based Investment Outcomes!

The power of Direct Indexing can be used to deliver hyper-customized client solutions, as an alternative to canned index solutions such as Target Date Funds or some types of annuitized payout products.

A custom investment goal involves just two key ingredients: a time horizon and a Safety Net level for the account. Optionally, it can include an aspirational upside target.

Here are three great examples of clearly articulated investment goals:

  1. I’d like to buy a house in 3 years and must have at least $100,000 for a down payment so I can qualify for a million dollar loan. Ideally, I’d really like to have $200,000 so I can avoid having to pay expensive mortgage insurance.
  2. I expect my daughter to be ready for college in 8 years and want to have at least $30,000 per year for her four years in college,  but ideally, I’d like to have $75,000 a year to cover all her expenses without burdening her with a student loan.
  3. I plan to retire in 10 years. For the next 30 years after that, I’d need a minimum of $5000 a month but I’d really love to have $10,000 a month.

Traditional approaches involve canned, prefabricated “one-size-fits-most” products that often come in inflexible and expensive wrapping. Think of a Target Date Fund, a Period Certain Annuity or a Defined Outcome ETF.

Direct Indexing goes about this differently, by working backwards from the client’s goals to the holdings that will help get them there given each client’s risk budgets. Not all 2050-retirees have identical capacities for risk, and therefore shouldn’t necessarily be in the identical mix of stocks and bonds.

Using the power of Direct Indexed accounts, Advisors can help clients formulate these goals, and our Outcome Shaping engine is designed to generate a customized asset allocation that adapts to changing market conditions to get them there regardless of what happens to stocks and bonds! While there are no guarantees in these markets, our system is designed to monitor the risk budget and reallocate risk to maximize the probability of hitting the target while maintaining a Safety Net.

One-click control over downside ...

Customize your Safety Net dollar level, and our Goal Optimizing Outcome Shaping Engine algorithm does the rest – automatically allocating between expertly designed risk-seeking stock portfolios and risk-managed bond portfolios to maximize the chances of hitting your upside target without ending up below the safety net.

Most investors understand that there are times when they might lose money. Our Goal Optimizing Engine is designed to protect your client from losing more money than they sign up for!

WORLD CLASS COMPANIES WORK WITH US

From College to Retirement Income ...

Our elegant two-parameter Goal Based Investing framework (target date and downside safety net) can be used to implement a surprisingly powerful range of outcomes ranging from pre-retirement to retirement. These include:

  • Saving for kids’ college: e.g. 4 annual withdrawals of a minimum of $30,000 but ideally $75,000 – starting 10 years from now
  • Retirement income: e.g. 20 payments starting in 10 years of a minimum of $100,000 per year but ideally $200,000 per year (reminiscent of a Period Certain Variable Annuity)
  • Principal Preservation: e.g. $50,000 today, should be no less than $50,000 in 3 years and the hope is to get it to $100,000!

Even if you choose an unrealistic upside target (e.g. $50K to $100K in 3 years with principal preservation), Optimal’s engine’s powerful and intuitive visualization control panel will show you that it’s extremely unrealistic! However, the engine strives to ensure that the downside limit (e.g. of $50K after 3 years in the Principal Preservation example above) is preserved regardless of what happens in the stock and bond markets.

Optimal’s rebalancing engine is continually working to maximize the probability of reaching your upside target without violating your safety net

From College to Retirement Income ...

  • All account values and settings are systematically monitored for changes
  • We compute the risk budget from the account value, upside and downside levels
  • The engine reallocates between a mix of stocks and a portfolio of duration matched bonds designed to be immunized against interest rate changes over the investment horizon
  • The rebalancer generates trades as needed
    Because these are implemented as Direct Indexed custom portfolios, you can make changes at any time, with no lock ups, no surrender charges and no limitations on liquidity.

Each client portfolio holds only liquid, long-only securities. We do not use derivatives, options or other expensive or opaque instruments.

Support: Live, friendly and human!

Live, clueful, oversight and assistance when you need it (doing what humans do best) plus Automated investing with Intelligent algorithms (doing what computers do best)

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