The proposals generate on TIFIN Wealth come with a plethora of insights about a client's current and recommended portfolio. Charts showing historical performance and potential forward returns alongside portfolio statistics such as volatility, max drawdown, upside & downside capture, sector & region allocation, and net expense ratios help advisor's drive meaningful conversations with their clients or prospects.
Volatility & Max Drawdown
Volatility, as defined by standard deviation, is one indicator of portfolio risk. Too high means the portfolio is at risk of large losses. Too low, the portfolio's potential may be restricted.
Max Drawdown is a peak-to-trough decline of a portfolio. For example, if a trading account has $10,000 in it and the funds drop to $7,000 before moving back above $10,000, then the drawdown in this portfolio is 30%.
Upside & Downside Capture
Upside Capture and Downside Capture show us whether a given fund or portfolio has gained more or lost less than a broad market benchmark during periods of market strength and weakness.
The relative benchmark security is selected by the Advisor. Returns are net of Expense Ratios and net of the Advisor’s advisory fee
Potential Forward Returns
TIFIN Wealth calculates the forward expected returns and volatility for the Current and Recommended Portfolios. TIFIN Wealth aggregates Capital Market Assumptions (CMAs) from various large third-party asset managers and uses proprietary techniques to forecast security and portfolio specific returns and volatility. Using Geometric Brownian Motion, TIFIN Wealth projects the Current and Recommended portfolios’ balances for 10 years.
When looking at the 5-Year Potential Returns Forecast chart in the IPS, TIFIN forecasts the 85th percentile and the 15th percentile of expected returns. This implies that 15% of expected returns are above the 85th percentile or "Upper" band and 15% of returns fall below the 15th percentile or "Lower" band. In other words, ~70% of the time portfolio balances will fall in between the “Upper” and “Lower” bands (shaded area) given the forecasted portfolio’s return and volatility.
The “Mean Band” represents the expected return (50th percentile) of the respected portfolio (Current or Recommended) over the next 5 years. Generally speaking:
~50% of the time the portfolio returns will be above the Mean Band.
~50% of the time the portfolio returns will be below the Mean Band.
The “Lower Band” represents the bottom 15 th percentile of possible portfolio balances. Generally speaking:
~85% of the time the portfolio returns will be above the Lower Band.
~15% of the time the portfolio returns will be below the Lower Band.
The “Upper Band” represents the top 85th percentile of possible portfolio balances. Generally speaking:
~85% of the time the portfolio returns will be below the Upper Band.
~15% of the time the portfolio returns will be above the Upper Band.
Historical Performance
Historical Performance is shown over a previous period of 1-5 years with a starting balance of $100 as of the requested performance start date. Funds (Mutual Funds and ETFs) are calculated net of fees. Common Stock equities are calculated as Total Return. Portfolio allocations are held constant and rebalanced. The relative investment security for comparative performance is selected by the Advisor and not an official benchmark or index.
Region Allocation
TIFIN Wealth will compare the region allocations of your current and recommended portfolios across Super-regions (Developed Markets and Emerging Markets) to see how your holdings and its underlying exposures will change with the recommendation.
Section Allocation
Comparing asset allocations across the major Asset Classes help to visualize how your holdings and its underlying exposures will change between the client's current and recommended portfolio.
Net Expense Ratio
The Net Expense Ratio for each fund is sourced from the fund's prospectus (via a data feed from Morningstar).
Net Expense Ratio is the percentage of the fund's assets (net of reimbursements) used to pay for operating expenses and management fees, including 12b-1 fees, administrative fees, and all other asset-based costs incurred by the fund (except for brokerage costs).
The Net Expense Ratio is reflected in the fund's NAV. Sales charges, Advisor’s fees or platform fees are not included in the expense ratio.
The Net Expense Ratio is collected annually from a fund's prospectus assuming the latest prospectus date is less than one year old.
If the prospectus is not available or >1 year old, the Annual Reported Net Expense Ratio is used.
The Portfolio-level Expense Ratio is calculated using an aggregated weighted-average of all fund-level Expense Ratios.
Does TIFIN Wealth show internal expense ratios/transaction fees?
No, TIFIN Wealth does not consider internal expense ratios or transaction fees. These are generally specific to the custodian and there are a lot of nuances as to when these can be waived and/or reduced.