Wealth42 has blended optimization sciences with personal finance to help people make decisions towards their goals.
Wealth42 is a customizable AI platform for financial product sales. ****It leverages proprietary MINT Science technology, an Optimization Engine specialized in managing cash flow scenarios. It efficiently aligns client goals with financial products like mutual funds, ETFs, time-horizon model portfolios, term life insurance, endowment plans, loans, deposits, Pensions, etc.
<aside> đź’ˇ Existing financial calculators are practically unusable. They cannot consider individual cashflow constraints and do not interconnect well. Therefore, they cannot provide practical recommendations for executable transactions.
For example, using a loan amortization calculator and a SIP calculator is very time-consuming to devise a plan to afford a house and a car concurrently, given a fixed monthly surplus. One would have to plan for the SIPs for down payments and then EMI calculators for the loans that would follow, and then integrate them across the timelines of purchasing the house and car into a combined cash flow. SIP calculators don’t answer the question of required asset allocations, either.
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Often, one needs to rely on spreadsheets to interconnect cash flows. However, optimizing across a vast universe of cash flow constraints of various products is infeasible on a generic spreadsheet application.
Wealth42 AI platform can be leveraged to generate actionable recommendations within seconds. and strictly adhere to constraints (or Advisory policy) configured (at least) at the institutional level.
A qualified financial planning engine should meet all of the following –
All recommendations must be backed with reasoning.
Users are tired of financial products being pushed to them by their relationship managers (RMs). All recommendations should be explainable to build conviction enough to drive a user’s intent to make an investment. For example, for investment recommendations, the following questions need to be answered:
To be able to answer these questions, the recommendations framework must work backward from these questions to generate the advice.
Recommendations must be actionable/immediately executable.
Advice that is not executable will not be followed. Executable advice should be in the form of a transaction that the user can execute. Hence, it should contain:
This transaction should also be easily executable within the same platform so that the user's progress on the plan can be tracked by the same platform.
Allow for multiple goals with an integrated cash flow/portfolio.
For example, a user may want to buy a house in the next 5 years, a car every 8 years, and save up for their child's education, and towards their retirement. We must respect the fact that the user has a fixed monthly income, and this income also grows with time, growing faster at the start of the career and slowing down towards the end. This means that there needs to be a single portfolio managed across multiple goals and prioritisation of investments towards different goals over time. Simply making Systematic Investments (SIPs) towards all goals together is not viable since it will lead to an inflated investment requirement at the start of the plan and inefficiently utilize the income the user has later on in life, as SIPs end when the goals are realized.
Must accommodate existing assets
Change is the only constant, and clients often come back with changed goals. Re-planning should be a simple pain-free process. The challenge here is the consideration of existing investments into the cashflow plan in a fashion that also minimizes portfolio churn requirement.
MINT, not overloaded income assessment
Working with an income assessment approach is also great, however it comes with the caveat of requiring complete user portfolio control, and extensive data collection of goals. That feels overloaded. Hence – start by helping them find the MINT.
This is because the difference between the total inflows and outflows in a month is assumed to be the user's investment ability that month by the planner. If the user has multiple portfolios being managed by different advisors (which is very common), it is difficult to track external portfolios as part of a user's plan without the ability to advise on them. An easier approach is to work backward from the goals and let the user know how much surplus they should be earning to meet these goals. This way, the user can start with a single goal and keep adding more goals as the product integrates deeper into their life.
Should jointly optimize investments & loans
Users often have little to no idea how to approach decisions regarding liabilities—how much down payment to make, pre-payments vs. investing, etc. Hence, our approach is to bake this into the financial planning process. The input required from the user should only be the loan eligibility and not the loan decision. The plan should be created such that the engine recommends automatically:
The engine should also take into account the reduced principal after the prepayment as part of the cashflow to be accurate.
Smartly manage contingency requirement calculation.
Contingency requirements should be worked backward from essential spending and mortgage/loan payments. The user should decide how many months they want to stay covered in their contingency planning and how long it will take to build it. The investments required towards this contingency building should also be part of the surplus requirement and should be calculated on a rolling window basis each month, based on the spending and mortgage payments in the contingency coverage period from that month.
Identify term life insurance requirements based on expense-replacement
Ideal calculation of life insurance requirements should be done on an expense replacement basis so that all your planned expenses can still happen even in the unfortunate event of the breadwinner's demise. This payout can also be invested to meet all planned goals, so there is an actionable plan for managing the money.