Christopher Volpe is director of wealth management solutions at Informa Financial Intelligence. He manages the strategic direction, client services, and product development of Informa’s financial services technology solution, Zephyr.
Russ Alan Prince: Tell us about the Zephyr platform and fintech’s role in financial services.
Christopher Volpe: For over 30 years, Zephyr has provided wealth and asset managers research capabilities, investment analysis, optimization, monitoring, performance reporting, and client engagement tools. Our asset allocation capabilities allow advisors, allocators, and managers to efficiently build, evaluate and optimize portfolios. They can also determine the probability of meeting future wealth goals with ease.
Beyond asset allocation, financial professionals can evaluate portfolio composition including equity, fixed income, and alternative investment characteristics along with sector and regional weightings, top ten holdings, and country exposure. These advanced data analytics give investment professionals filtering capabilities combined with statistical tools that can track and compare investment products across 200+ key investment statistics and conduct returns-based style analysis. These statistics go above and beyond a simple “risk score” to provide advanced insight into a client’s investments.
Furthermore, private wealth advisors can track the performance of their client’s investments broken down at every asset class level to ensure they are getting the best return for the risks they are taking with each investment type. The ability to provide customized reporting based on the needs of the client is a key aspect for investment professionals to demonstrate the value they bring today and into the future. Fintech enables advisors to have meaningful and valuable engagement with their clients to better help them meet their investment objectives and needs.
Prince: It is difficult to locate quality data and analyses on alternatives. How is Zephyr addressing this gap for advisors looking to add alternatives allocations within client portfolios?
Volpe: Through the Zephyr platform, financial professionals can include data on non-traditional assets including hedge funds, CTAs, and other sophisticated investment vehicles to meet the more sophisticated needs of ultra-high-net-worth investors. These assets tend to be less liquid and are therefore harder to value and evaluate. By using various data sources, we make conducting in-depth analysis, searches, and reporting on alternative assets easier and more comprehensive. The platform also supports the incorporation of custom assets for vehicles that are not typically found in publicly available third-party databases or that are proprietary, such as real estate, classic cars, art, etc.
In addition to rich data on alternatives, Zephyr provides proprietary investment analytics to help advisors fully understand the benefits and role that alternatives play within ultra-high-net-worth investment portfolios. With our custom reporting capabilities, advisors can better illustrate to clients how an alternatives allocation can impact their portfolio.
Prince: ESG is a popular investment trend, how does Zephyr help accommodate for this?
Volpe: Environmental, Social, and Governance—ESG—aspects of investments have significantly grown in popularity over the past several years and will continue to grow. It is important for advisors to understand not only the monetary goals of a client but also the less tangible goals when creating and evaluating a portfolio. There is a lot of information about ESG and with that amount of information naturally comes some confusion.
A major concern among investors and advisors that we feel is critical to address is the issue of ESG rating divergence. There are many different parties providing ESG ratings and analysis, but they do not always agree or provide the transparency necessary to fully evaluate investments.
We’ve conducted research internally which shows that there is a very wide divergence within ESG ratings amongst mutual funds that classify themselves as an ESG investment. In fact, broad equity indexes have better ESG ratings than some of the ESG classified mutual funds. It is critical to look beyond the fund name and investment objective to locate investment strategies that score well across ESG ratings and align with a client’s unique values.
Another important consideration for us is offering advisors the ability to analyze the ESG performance of investment vehicles at a more granular level so that they could better assist their clients in creating portfolios that truly reflect their values. More than simply offering ratings, we provide information on what constitutes those ratings known as key performance indicators—KPIs—and allow those KPIs to be used in screening, creating, and evaluating portfolios. This allows the advisor or manager to focus on what is important to the client instead of what was important to the rating agency. For example, an investment may have a high ESG score from KPIs across ESG, but lower KPIs in those that focus on say, climate change.
To accomplish these objectives, we partnered with OWL Analytics. OWL’s ratings and rankings methodology is consensus-based which overcomes the subjectivity challenge, and we can offer our clients analytics on twelve categories within E, S, and G such as pollution prevention, human rights, and management ethics. This gives them the ability to invest in a “theme” such as climate change, rather than an overall ESG score.
The Zephyr platform allows advisors to use the OWL data to analyze clients’ current holdings of equities, mutual funds, ETFs, and even SMAs using our PSN database. They can then screen for more suitable assets and create better portfolios based on their clients’ values.
Russ Alan Prince is the executive director of Private Wealth magazine and one of the leading authorities in the private wealth industry. He consults with family offices, the wealthy, fast-tracking entrepreneurs, and select professionals. Connect with him on LinkedIn.com.