‘Clients need MRIs, not tongue depressors’

Global firm wants to raise the bar in advice suitability through rigorously validated financial-planning solution

‘Clients need MRIs, not tongue depressors’

Things are moving fast for PlanPlus Global, a Canada-based financial-planning and risk-profiling software firm.

Earlier this month, Morningstar announced plans to acquire the firm as it expands its financial-planning capabilities across the globe. That came on the heels of PlanPlus Global unveiling a new module to bolster its own SuitabilityPro suite of products, which it has developed over more than two decades working with advice professionals, investment experts, regulators, academics, and psychometricians.

That rigorous process of development was absolutely necessary to Shawn Brayman, founder and CEO of PlanPlus Global, who thinks too many firms don’t take their know-your-client tools and processes seriously enough.

‘Letting advisors give clients an MRI’

“In 2015, we were hired by the OSC Investor Advisory Panel to do a review of all the academic literature and the tools behind the actual questionnaires used by Canadian firms to access risk profiles,” Brayman said. “What we found was that most of the questionnaires were very simplistic, asking clients five to 15 questions before shoving them into a portfolio.”

While many risk-tolerance questionnaires take a tick-the-compliance-checkbox approach, Brayman said the SuitabilityPro platform considers multiple interacting factors. That includes the individual’s appetite for risk, which it determines based on methods rooted in the quantitative area of psychology known as psychometrics.

“It’s like letting advisors give clients an MRI, rather than just asking them to stick out their tongue to figure out if they’re sick,” Brayman said.

Describing the rigorous academic validation process that went behind the solution, he said PlanPlus Global has provided more than 15 years’ worth of sanitized client data available to researchers around the world. Because of their output and feedback, Brayman is confident that his firm’s software can determine people’s risk appetite “to the highest degree of reliability.”

Finding consistency in grey areas

Another problem that the SuitabilityPro suite tackles involves professional judgment. Based on consultations with thousands of advisors across the world, PlanPlus has confirmed the existence of grey areas of financial advice, such as when a client’s goal requires that they take on risks beyond what they said they can tolerate.

“In areas like this, there’s no absolute right answer — advisors are split to different extents, casting specific votes depending on factors like their compliance department and personal beliefs,” Brayman said. “What’s important is to recognize the biases you bring to the table as an advisor. That’s why we have a tool called the Professional Judgment matrix, where advisors can set their own guidelines in a formalized way.”

With that information in hand, users can dispense more high-quality and consistent advice. Instead of imposing specific recommendations on people, advisors can explain the trade-offs their clients face and fully disclose the factors that can bias their professional opinions.

Finding the perfect fit

“Some advisors just do the minimum level of KYC due diligence and go about putting the client’s money into their investments,” Brayman said. “But clients are complicated people; they have other obligations that could be more pressing like debt, mortgages, and maybe their kids’ education. People in the planning space have always understood this, and now I think regulations are starting to push more in the direction of holistic advice.”

Against that backdrop, the deal with Morningstar, set to close in the second quarter of this year, is a timely one. While PlanPlus Global’s footprint already covers advisors and clients in 35 countries, Brayman predicts that Morningstar’s global reach, sales, and marketing infrastructure could help extend his firm’s impact by several orders of magnitude.

“We wanted someone that believed in evidence and research, and really cared about doing things right,” he said. “We’ve been using Morningstar data with our tool for 15 years now, so we know they basically tick all those boxes.”

“Their deep product understanding — which is the best in the world in my view — complements our expertise at KYC,” Brayman added. “Sometimes you see transactions and go ‘does this really work?’, and this one for me, is just a perfect fit.”


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