Finance Law
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The services are perfectly positioned and pride itself to deliver world-class services in Investment Banking, Securities Trading,
and Asset Management. Our services are tailored with the objective to build long-term personal relationships and accomplish
client’s investment goals. Our passion for business is embedded in our culture and we make it a priority to constantly evolve
in our business environment. Our mission, vision, and values reinforce the longevity of Brown Law Office brand name. We deploy
our proficiencies in creating value for all our clients. Brown Law Office offers you a partnership that will stand the test of time.
What is the Traditional Approach?
A majority of the financial planning industry at present relies upon three key assumptions when designing investment
strategies for clients: The first assumption is that “risk” is measured by volatility – that is, a risky asset is one
which has highly variable short and medium-term returns. The second key assumption is that each investor has a consistent
personal approach to risk which can be determined, and which provides a reasonable basis for investment strategy.
Thirdly, it is assumed that an appropriate investment portfolio can be constructed by mixing different proportions of
five major asset classes, which have consistent and predictable return and volatility characteristics, to deliver a
portfolio to the client with a volatility level that’s consistent with their risk profile.
The role of the planner in this model is to select underlying investment managers or direct investments within each
asset class, and to rebalance the client’s investments each year in line with pre-defined strategic asset allocation
and changes in the investor’s circumstances.
The Definition of Risk.
Defining risk as volatility assumes that each asset class has a typical or expected return over a particular time period, that
can be understood and used for planning purposes. Some asset classes’ returns are more predictable than others. Generally, the
more predictable returns are over the short term, the lower they also tend to be. More volatile asset classes tend to have a
narrower range of expected returns if held for longer periods.
Risk Profiling
A client’s “risk profile” is usually built using a written questionnaire. Clients answer questions which aim to determine their
knowledge of markets, and their emotional risk tolerance – that is, how much volatility can they tolerate? Investors then are
grouped into one of five categories of risk tolerance based on their answers: Conservative, Moderately Conservative, Balanced,
Moderately Aggressive or Aggressive.
Strategic Asset Allocation
Each of these five profiles has a pre-determined Strategic Asset Allocation (SAA). Each profile has a mix of the
different major asset classes, which aims to deliver the maximum potential investment return within the different
volatility constraints of each risk profile. By mixing asset classes, the theory of diversification suggests that
for a given rate of return, volatility can be reduced because different asset classes perform well at different
times – that is, they are not perfectly correlated.