Question 1

What is stochastic modelling, anyway?

Accepted Answer

The traditional approach to financial advice uses what is know as "deterministic projections" whereby financial modelling of the client's future is based on a fixed rate of investment return, normally the assumed average return. But that tells you nothing about variability in returns from year to year (i.e. reality!), which can impact client outcomes. The extent of that impact depends on a host of factors including the size and timing of future cashflows (savings, drawdowns, social security etc), the clients goals and the client's desired confidence level (or risk tolerance). What is needed then is stochastic modelling.

Stochastic Modelling is incredibly powerful because it enables a more informed decision by the client as to how to invest their funds and what goals are achievale. It allows the adviser and their client to make a decision based on modelling that reflects reality (returns varying from period to period) and that properly accounts for risk in the context of achieving goals. This is done through simulating the future thousands of times, thus enabling the adviser to show projections at different probabilities or levels of confidence. It starts to move the question away from "how fearful are you of short-term fluctuations in investment performance" - i.e. the current approach - to the question "what level of confidence do you want to plan with when setting your goals and choosing an investment strategy to support those goals?"

Question 2

Why should I use Openmarkets Advice?

Accepted Answer

Openmarkets Advice is the best tool available for modelling your client's financial future, properly taking into account risk, finding what goals are achievable and finding the investment portfolio that will enable your client to achieve those goals. This is delivered through our world-leading technology, which combines stochastic modelling with portfolio optimisation. This, coupled with an easy-to-use and simple interface, also provides a more engaging experience for the client and more efficient workflow for the adviser.

In short, what does this mean for the adviser?
* Better client outcomes
* More client engagement
* Improved compliance with Best Interest Duty
* Lower cost of advice
* Lead generation

Question 3

How is Openmarkets Advice different?

Accepted Answer

Openmarkets Advice is different advice tools because it:
* uses stochastic modelling rather than deterministic modelling
* uses portfolio optimisation rather than risk profiling
* combines these two features, stochastic modelling and portfolio optimisation, in a goals-based, holistic modelling tool
* engages the client through simple demonstration of complex concepts and allows the client and adviser together to work together to finalise a financial plan and investment strategy
* is easily and highly configurable, so it can model what you want to show to your clients
* can be used as a lead generation advice tool or to deliver limited or scaled advice to clients efficently

What are the benefits of this?
* Better client outcomes
* More client engagement
* Improved compliance with Best Interest Duty
* Lower cost of advice
* Lead generation

Question 4

How does portfolio optimisation work?

Accepted Answer

The traditional approach to financial advice often relies on "risk-profiling" to determine the client's investment portfolio. This approach is based on a subjective questionnaire that tries to find out the level of fear that the client experiences in response to short-term variability in markets and investment returns. Investments that produce highly variable short-term returns (eg equities) are described as more "risky" than those producing more stable short-term returns (eg cash) and if the client is shown to be "risk averse" then they are directed to an investment portfolio that has more stable returns. But that is also typically a lower return portfolio over the long term, which is the typically the time-frame For most clients. In terms of real risk (i.e. chance of failing achieve goals), this approach is often actually counter-productive - it puts the client in riskier portfolios!

Portfolio optimisation seeks to model many (could be hundreds) of different portfolios for the client's financial future and compare all the results in terms of goals and risk and find the best one i.e. the one that maximises the client's goals at the level of confidence (or risk) they have chosen. For example, find the portfolio that produces the best retirement income and legacy for a client at their chosen confidence level of 90% (where confidence level is just another way of expressing risk (eg 90% confidence of achieving goals is another way of saying a 10% risk of failing to achieve goals). In financial advice, portfolio optimisation is most meaningful when it is combined with stochastic modelling.

Question 5

What’s wrong with the current approach to financial advice?

Accepted Answer

There are key components in the current approach to financial advice that may produce poor outcomes for clients and the adviser.

Firstly, the risk-profiling process for determining the client's asset allocation is generally inadquate. It's focus is almost entirely on the short-term (one year) variability of investment performance (described as "risk"). Investments producing more variable short-term returns (eg equities) are described as more "risky" than those producing more stable short-term returns (eg cash). But this is true only if the client has a short time horizon.  But risk, properly defined, is the chance that the client will fail to meet their goals. In reality, most clients have much longer time horizons and in that situation the higher-yielding, more variable investments (eg equities) are actually less risky than lower yielding more stable investments (eg cash). Yes the client will experience more variability with higher-yielding investments, but even allowing for that they may still have a higher chance of achieving their goals than with lower-yielding more stable returns. The current approach is really addressing fear, not risk.

Secondly, the current approach to financial advice, where financial projections use assumed average investment returns for a portfolio, show outcomes that have only a 50% chance of being met. For example, when a client is near or in retirement and advice is provided around what retirement income they can drawdown from their investments, there is a 50% chance the client will run out of funds earlier than expected. And that is just too much risk for most people - the toss of a coin that they will end up on the age pension before their target shortfall age!

To address both of the above shortcomings, financial advice tools and processes need to include stochastic modelling of the client's future combined with portfolio optimisation and presented in a way that the client understands and therefore accepts as being the best advice.

Question 6

My sign-up verification email has expired, how do I get a new one?

Accepted Answer

When you first sign up, you have 24 hours to click on the link in the verification email.

* If you didn't receive an email, please first check your junk / spam folders and ensure you used a valid email to register.
* If the verification link has expired, follow these steps:

1. Visit the [login page of Investfit](https://app.investfit.io/login)
2. Click `Problems with signing in?`
3. Enter your email address
4. Click on the link in the email you receive
5. Now you should be able to sign in using the password you set when signing up

*If you don't know your password, simply reset it*

Question 7

Does investfit account for home value increases over time?

Accepted Answer

Yes. The program assumes the value of the family home increases at the AWE (Average Weekly Earnings) rate assumption over time. This may be on the conservative side, which may understate the results for a scenario that includes equity in the home to fund retirement.

Question 8

Has investfit been independently reviewed?

Accepted Answer

Yes. The investment functions and financial calculations are regularly reviewed by an independent body. To date we have had the program reviewed twice, first by AccessUTS (The consulting arm of The University of Technology Sydney) in November 2015 and second by KPMG Actuarial in July 2017.

Question 9

I'm having trouble signing in to Investfit

Accepted Answer

Sorry to hear you're having troubles signing in.

We've found there's generally two reasons that cause this, and both are solved in a similar way:

## 1) Your email hasn't yet been verified
When you first sign up for Investfit, you will be sent an 'email verification' to the email address you used to register.

This helps us keep your account secure by ensuring you have entered the correct email address and that you are the owner of that address.

If you never received it, please check your spam/junk folders first. If you still haven't received it, please contact support.

The link in that email expires after 24hours. If it has expired, you'll need to verify before you can continue. It's easy to get a new verification link, [just follow these steps](https://investfit.malcolm.app/faqs/verification-email-expired-renew).

## 2) Your password is incorrect
Firstly, double-check that you're typing in your password correctly. Be careful about upper and lower case letters. [See our Password Policy](https://investfit.malcolm.app/faqs/investfit-password-policy)

If that didn't work for you, try [resetting your password](https://investfit.malcolm.app/faqs/reset-change-password)

Question 10

Investfit Password Policy

Accepted Answer

It's important to set a secure password as part of keeping your account safe.

We've set a password policy to ensure your account is kept secure. The following will be required when setting an initial password, or changing it at a later date:

* Minimum of 8 characters
* At least 1 uppercase letter
* At least 1 lowercase letter
* At least 1 number
* *You may also use symbols and up to 256 characters to improve security as per your companies guidelines / policies*

*Please Note, this policy change was made in July 2020. If you had created a password prior to this, no changes are required, but we recommend updating your password to comply with the stricter password policy*

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