Risk exposure is top of mind for wealth managers and financial institutions. If your client’s portfolio carries a risk exposure that is too high or too low according to the client’s risk profile, that exposes the institution to a regulatory risk or leads to a lower than expected performance. Due to their asynchronous payoffs, the risk levels of structured products rise and fall during lifecycle. Furthermore, barrier hits or knock outs can have an impact on the products. So, in order to advise their clients on a highest standard, clients advisors need all that relevant information.
The solution to controlling risk exposure is transparency. Transparency is possible with tools that support client advisors during the whole lifecycle of structured products and the management of product portfolios. The lifecycle monitoring of derivatives and structured products can help financial institutions and wealth managers provide an extraordinary service to their wealth clients and ensure client portfolio risks correspond to client risk profiles. When transparency is increased, advisors can provide more solid advice and build trust with the client.
“It is counter-intuitive to invest in a product or a fund in which there is no price transparency, where you can't see the value of the assets and have little ability to exit the investment if it no longer meets investors' requirements.”
By working with the right partner, you can adopt a client-specific lifecycle monitoring service in combination with an alerting system that allows you to make improvements in:
- Product redemption dates
- Barrier-hit probabilities
- Knock-out probabilities
- Auto call probabilities
- Risk figures/Value at Risk (VaR)
- Yield estimations
Among the many benefits this can offer are an improvement in the sales process, and, ultimately, sales revenue. Additionally, getting greater transparency over the whole portfolio enables advisors to get control of portfolio risks at any time.