Day 1
• Investor profiling, investor psychology and investor temperament analysis
- Traditional approaches to profiling private investors
- New approaches to profiling the client
- Understanding what motivates other peoples’ investment and financial behaviour
- The psychological buttons of fear, greed, loathing, panic, disbelief and capitulation in financial markets
- Investor temperament analysis
- Diagnostic questionnaires and their application
Case study: investor temperament analysis.
• Behavioural finance for private bankers and their clients
- What is behavioural finance
- Efficient markets and behavioural finance
- What private bankers and their clients need to understand about behavioural finance
- Systematic errors and mistakes in investment thinking
- Common behavioural finance traits; over-confidence and over-reaction bias, myopic loss aversion, framing and coding, cognitive dissonance, representativeness
- Practical examples of behavioural finance traits at work in the markets
Case study: why investors make systematic errors in their investment decision making.
• Portfolio planning using behavioural finance theory
- Investor herding behaviour and portfolio planning
- How do investors really interpret the behaviour and performance of assets
- Portfolio diversification – the importance of correlation
- Absolute vs. relative return objectives and benchmarks
- Benchmarks and benchmarking
Case study: portfolio planning exercises.
Day 2
New approaches to asset allocation and portfolio structuring for private clients
• Applying the principles of post-modern portfolio theory to private clients
- Foundations of post-modern portfolio theory
- What private bankers need to know about postmodern portfolio theory
- Problems with standard deviation as a measure of risk
- Downside deviation and the minimum acceptable return (MAR)
- The target rate of return and upside potential
- Applying the principles of post-modern portfolio theory in private client portfolio management
Case study: post-modern portfolio theory applied to private investors.
• Asset allocation and portfolio structure
- Phases and cycles in asset allocation
- Matching asset classes with wealth levels and income needs
- Factors affecting individual investors’ asset allocation decisions
- Determinants of individual investors’ asset allocation
- The influence of investors’ actions and market outcomes on investor satisfaction
- Market cycle analysis - factors influencing asset prices in different phases
- Individual investor behaviour and insights from behavioural finance
• Diagnostic and profiling tools to help design the portfolio structure
- Factors affecting the performance orientation of a private client
- Individual investor satisfaction and utility analysis
- An integrated approach to asset allocation decision making for private clients
- Strategies for maximisers, builders and preservers
- Strategies for ‘satisfiers’
Case study: modelling investor satisfaction and utility analysis.
• Asset allocation rebalancing and restructuring in response to market moves
- Principles of asset allocation rebalancing
- Advantages and disadvantages of rebalancing
- Scope of rebalancing
- Asset allocation rebalancing approaches
- Critical success factors in rebalancing
- Choosing a rebalancing approach to match the client’s risk tolerance
Day 3
Structured products and total return solutions for private banking clients
• The demand for total return and absolute return products by private clients
- Why private clients are becoming more absolute and total return oriented
- The differences between absolute and total return
- The convergence of absolute and total return
- Why do investors buy total return and structured products
- Overview of total return and structured products
- Uses and applications of total return and structured products in portfolios
Case study: positioning absolute and total return products appropriately.
• Building blocks of financial engineering for private bankers
- Structural alpha vs. investment alpha
- What is a structured derivative vs. an exchange traded derivative
- The basic building blocks
- Some common structures found in practice spreads, volatility structures, arbitrage structures, exotics
- How to lock in the absolute return when achieved
- Downside protection vs. upside return potential
Practical exercise: designing simple structures to match a client’s views and risk tolerances.
• Risk reduction and return enhancement opportunities and strategies
- Risk reduction and return enhancement opportunities
- Currency markets
- Equity markets
- Credit markets
- The Structured product menu
- Commodity linked notes
- Credit linked notes
- Currency linked structures
- Equity linked notes
- Interest rate linked notes
Case study: applications of structured products.
Day 4
CRM and account development skills for private bankers
• Customised CRM for private bankers
- The “Wealth Management Loop”
- Developing a systematic way to think about clients
- Identifying new opportunities within a relationship
- Different types of client-advisor relationship
- Characteristics of relationship levels and indicators of success
- Understanding customer life-cycles and the sales process
- Moving towards customised relationship management
Case study: customer life-cycles and the sales process.
• Diagnostic frameworks
- The client’s mission statement
- Clients’ emotional needs
- The hierarchy of client experiences
- Client diagnostics drive client needs
- Diagnostic framework for approaching the client and recommending the proper solution
Practical exercise: emotional needs and diagnostics.
• Customer tiering and account analysis
- What is strategic tiering of customer relationships?
- Customer tiering concepts – buying centres, wallet size, share of wallet
- Old, new and emerging customer buying centres
- Assessing the potential of your accounts
- Steps in the account analysis process
- Strategies for moving clients to a higher tier
Case study: moving clients to a higher tier.
• Devising and structuring a relationship and development plan
- Understanding the different phases of the sales cycle
- Identifying which phase of the sales cycle you are currently in
- Assessing the potential and problems in an account
- How to devise and structure a relationship and development plan
Course conclusion: account development plan preparations and presentations.