Odyssey Financial Technologies, a company engaged in wealth and asset management systems, publishes a white paper called The Consequences of the 2008 Financial Crisis for Wealth Management. Analysing current market situation Odyssey study outlines the role of technology, qualified client communication on investment risk and structured advice on asset allocation.
Odyssey’s white paper shows that asset allocation services, which are often the reserve of very wealthy clients, will become essential in the aftermath of the financial crisis, and be made available to a larger number of clients. This applies to execution-only clients, in particular. Such investors are often under-protected, only receive scanty advice on how to invest their money, and suffer simultaneously from a lack of portfolio diversification and practically non-existent risk management.
According to the study private investors need greater protection. Financial crisis of 2008 will bring about a reinforcement of legislation requiring stricter client relationship opening processes in order to make Know Your Customer rules and client investment profiling more systematic.
Lots of clients, forgetting the potential investment risks a little too quickly, were simply not prepared to take the brunt of the heavy falls we’re currently facing, says Antoine Duchateau, CEO, Odyssey Financial Technologies. Consequently, private wealth management institutions will have to apply stricter procedures aimed at protecting their clients and ensuring they understand the different risks linked to financial investments and only invest in the products they really understand. Private clients are now seeking more than ever to understand and even quantify how risk is created in a portfolio in both normal and abnormal market conditions.
In the fall-out of this unprecedented financial crisis, financial institutions will have to redefine the content of their investment advice offering and make their asset allocation advice available to a wider public, says Didier Pitton, product marketing director, Odyssey Financial Technologies. Professional asset allocation has the advantage of taking account of all the investment risk factors, attaining optimal diversification and therefore better protecting portfolios from a fall in the markets.
L.D.