fi360 toolkit™ for advisors · 2019. 1. 16. · fi360 toolkit™ for advisors: models guide...

FI360 TOOLKIT™ FOR ADVISORS:

Models Guide

Fi360, Inc. 2017 1

Models Overview

The My Models section of the Fi360 Toolkit for Advisors™ provides both asset class and investment specific models.

Strategic (asset class) and tactical (investment specific) views are available within a single model version. You may

also have multiple model versions of a model under a single model group name, (e.g. Conservative, Moderate,

Aggressive, etc.). These models can either stand alone or link up to existing clients, within the Client Cabinet.

Depending on the customization and approach of your firm’s model provision, two hierarchies are usually applied

for the overall structure in the My Models section of the Toolkit™:

Assigning one model under one group to many clients-This option is more streamlined since one change in

a model flows through to multiple clients


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Fi360, Inc. 2017 2

Assigning one model under one group to one client- This option is more custom

When entering a model for the first time, use the “Create new model version” function on the right‐ hand side of the

page and input the follow information at minimum:

Model Group Name (e.g. Conservative, Aggressive, Balanced, etc.)

Version Name (e.g. Default, Version A, 80/20, etc.)

Inflation Assumption (Default 2%)

Hypothetical Amount

Rebalancing Frequency

When selecting the rebalancing frequency, choose the option that reflects the rebalancing method you’re using for

the model. If you’re not rebalancing the model on a set schedule, but are rebalancing by making tactical decisions,

choose the “Manual” option.

After creating your first model, you can click on its version name to access the Strategic and Tactical Asset Allocation

interfaces. We’ll start on building an asset class model in the next section, also known as a Strategic Asset Allocation,

and proceed onto adding investments into the model in the Tactical Asset Allocation.

PLEASE NOTE: You are not required to build both allocations, although, it is recommended that each section is

completed to provide the most comprehensive final reports.


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Fi360, Inc. 2017 3

Strategic Asset Allocation

You may to create a strategic asset Allocation by manually entering the peer group details. Click on the underlined

option, to proceed to the next step.

You will want to highlight one and click the “Add” button to bring the selection to the right‐hand side of the page.

Once you’ve selected your peer groups, you can change strategic values, lower and upper limits, and number of

investments. You may hide or reveal lower/upper limits by using the functions on the right‐hand side of the page.

Your selection may look something like this:


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Fi360, Inc. 2017 4

From our Capital Market Assumptions, provided by MacroRisk Analytics, you will be provided 5‐yr Portfolio Growth,

Annualized Return, Standard Deviation, Likely Range of Returns, and Large Loss Scenario based on your Peer Group

Allocation.

https://fi360.zendesk.com/hc/en-us/article_attachments/115002538268/Capital_Market_Assumptions.pdf


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Tactical Asset Allocation

The Tactical Asset Allocation is where investments and weightings are added to a model – these values are tracked

over time and help build the performance sections in model reports. The section may look like this in the beginning:

After click on “Create new!” you may select a time period and build the allocation from scratch. After building your

first time period, you can copy it into other time period by using the “Copy existing” function in the screenshot

below:


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Fi360, Inc. 2017 6

Once you’ve clicked on the “Create Time Period” button, you can click on the time period to access the interface for

investment selection and allocation input.

Within the time period interface, you have the option to type in tickers, fund names, or cusips. Click on the

dropdown menu when you see the fund you would like to select to add it to your model.

Once you add all of your funds, you should have a list of investments and allocations assigned to each of them. Your

model list may look something like this if you do not have a Strategic Asset Allocation:


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If you created a Strategic Asset Allocation, you will also see “Peer Group Model Requirement” headers:

You can document new time periods once they are available in the Toolkit, or you could continue building out the

historical holdings of it by adding more time periods and investments. If a model was created in December 2010,

your list may look more like the screenshot below:


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Using Models in the Client Cabinet and My Proposals

In Retirement Plan – Participant Directed clients, you may assign multiple model portfolios that have Tactical Asset

Allocations in the Holdings Model Portfolios area, as well as input # of participants, dollars invested, and model

specific notes. These models will show up in your reports, alongside any investments that are listed under the

“Investments” tab.

Create, assign, and un‐assign functions are located on the right‐hand side of the Model Portfolios section.


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Fi360, Inc. 2017 9

In My Proposals, a Strategic Asset Allocation may be combined with a Recommended Fund List to create a final

proposed lineup.

You may also add Tactical Asset Allocations within Current and/or Proposed lineups by clicking on the Model

Portfolios tab after the proposal is created; this interface looks very similar to the Model Portfolios section in My

Clients with options to assign, un‐assign, and create models.


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Fi360, Inc. 2017 10

Creating Reports

You may generate reports on by selecting a model via check box, clicking on the “View available reports” button on

the right‐hand side of the My Models page, clicking on the PDF symbol next to the report you want, and then

accessing the finished report in the Report Queue.

You may also generate reports within the Client Cabinet by accessing the Reports area under a specific client and

selecting the same model reports mentioned in the previous section. This report will include models that you have

assigned in the Models Portfolios area of the client.


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Performance Reporting

Model reports display both Historical and Hypothetical model performance. The report charts will always show a

return of the model portfolio. Additional returns include the tactical peer group benchmark, strategic peer group

benchmark and custom benchmark

Hypothetical Performance reporting

If you’ve created only one tactical time period for your model, the Hypothetical model data is the best chart to use

in your reporting. Performance is calculated for a hypothetical model by taking the current tactical investments and

allocations and building a return stream with this information starting ten years from the most current period

shown in the report.

Starting ten years ago, a weighted average return is calculated for each month based upon the current

investment asset allocations entered for this model

The model is rebalanced according to its defined rebalancing schedule to these original allocations

If an investment does not have a full 10yr return history, the weighted average return for those month(s) is

calculated excluding that investment’s allocation.

Once the investment has return history, it is included in all calculations from that point forward.

This allocation is rebalanced according to the rebalancing frequency set for the model.

Historical performance reporting

Historical performance reporting relies solely on the tactical data entered into the Fi360 Toolkit. If only one data

period is entered, the report will only show one month of return data in the reports. Ideally, the model should

contain two or more time periods spanning at least three years to generate a meaningful report. This is very

important if you’re seeking 3‐yr or 5‐yr standard deviation measures for models too.

Historical performance is calculated starting at the beginning data of the oldest time period entered for a model.

The historical performance ends at the end date of the newest period entered. In between, the portfolio is

rebalanced first by following the rules of the rebalancing frequency assigned to the model.

Secondly the tactical changes made to the model help to rebalance and reallocate the plan. However, the tactical

changes will only take place on the date of the rebalancing period. This means that if a tactical change has been

made in between rebalancing periods, the tactical change will only be made on the date of the rebalancing period,

not the date of the tactical change.


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A weighted return is calculated for each month based upon the actual model investments and allocations

stored for that period.

If manual rebalancing is selected, the model will continue to grow each month until a new period allocation

is specified within the system. At that point, it will rebalance to the new allocation and repeat the process.

If monthly, quarterly, semi-annual or annual rebalancing is selected, the model will continue to grow for the

specified time period and then it will automatically re-balance to the latest period allocation specified within

the system. It will continue to repeat this process.

If an investment does not have a return for a month, the weighted return for that month is calculated

excluding the investment's assets.

The individual monthly returns are then compounded to result in the corresponding annualized returns

shown in this report.

Benchmark Performance

The performance of the tactical peer group benchmark, strategic peer group benchmark (if included), and custom

benchmark (if included) are not an exact representation of any particular investment, as you cannot invest directly

in an indices or peer group median that are used in the calculations.

The tactical peer group benchmark represents the median manager return of the model investments.

Tactical Peer Group Benchmark performance is calculated as follows:

o Returns are reflective of the median manager's performance for each peer group utilized in the

model.

o A weighted return is calculated for each month based upon the actual model investments and

allocations utilized for that month.

o The same rebalancing schedule used in the model is applied to the tactical benchmark.

o If a peer group does not have a median return for a particular month, the assigned index return will

be used instead.

o The individual monthly returns are then compounded to result in the corresponding annualized

returns shown in this report.


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The strategic peer group benchmark represents the median manager return of the strategic allocation of

the model. Strategic Peer Group Benchmark performance is calculated as follows:

o If a strategic benchmark is assigned, the returns are reflective of the median manager's

performance for each peer group utilized in the strategic model.

o A weighted return is calculated for each month based on the current strategic peer group

allocations.

o The same rebalancing schedule used in the model is applied to the strategic benchmark.

o If a peer group does not have a median return for a particular month, the assigned index return will

be used instead.



The custom benchmark represents the index benchmark assigned to the model for comparison. Custom

Benchmark performance is calculated as follows:

o If a custom benchmark is assigned, the returns are reflective of the specified indices included in the

benchmark.

o A weighted return is calculated for each month based on the current index allocations.

o The same rebalancing schedule used in the model is applied to the custom benchmark.

o If an index does not have a return for a particular month, it will be excluded from the calculations.



Risk/ Return Analysis

The risk/return analysis report section provides a quick review of a models return and standard deviation compared

to the tactical peer group benchmark, strategic peer group benchmark and custom benchmark.

The axis of the graph represents the risk and return of the tactical peer group benchmark. The model, strategic peer

group, and custom benchmark are plotted in comparison to this benchmark. This view provides a convenient way to

compare models and gauge the differences between the model and benchmarks.


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Performance Attribution

The performance attribution report breaks down different components of a model’s return to help explain the value

added by it’s different components. Each row represents the additional value added (or subtracted) over the return

in the previous row. For example, the 4.65 return shown below in the 3‐ Month column represents the additional

return gained by adding the strategic asset allocation decisions to the model over the 3‐ Month T Bill. The

breakdown is as follows:

Starting from the top of the table, the 3‐Month T Bill is used as a baseline for return.

The next row shows the value added by adding different asset classes to the portfolio as represented by the

strategic asset allocation of the model. The median peer group manager for the strategic asset classes is

used to calculate the return.

The third row shows the value added by tactical asset allocation decisions made over the course of the

history of the model. The median peer group manager for the tactical asset classes is used to calculate the

return.

The fourth row shows the value added by selecting investment managers that outperform the median

manager represented in the tactical asset allocation

fi360 toolkit™ for advisors · 2019. 1. 16. · fi360 toolkit™ for advisors: models guide...

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