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Scaling Personalized Household Investing: The Future of Wealth Management

Author: Joe Smith, CFA – CIO, Parti Pris Investment Partners

The wealth management industry is facing unprecedented challenges and opportunities. Wealth managers and financial advisors need to embrace personalized investing to scale their business in a household setting. However, traditional portfolio management methods and technology pose limitations. WealthTech solutions that leverage portfolio risk optimization technology can help overcome these challenges and provide a more personalized touch in household portfolios.


The wealth management industry has traditionally used portfolio management methods that treat all investors the same. These methods have included blending mutual funds, exchange-traded funds, and separately managed accounts into standardized asset allocation models. However, clients now demand more personalized services.  Wealth managers and financial advisors are turning to new WealthTech solutions to bridge the gap between the client’s unique financial plan and a holistic investment portfolio tailored to their goals and objectives. This article explores the challenges of scaling personalized household investing and how portfolio optimization technology can help wealth managers and financial advisors offer personalized services to a larger number of clients.

Challenges in Scaling Personalized Household Investing

Personalized householding investing is a complex process that presents unique challenges to wealth managers and financial advisors.  These challenges are summarized in the following areas:

  • Limitations of Traditional Portfolio Management Methods and Technology: Traditional portfolio management methods and rebalancing technologies often neglect the management of portfolio investment risk and fail to account for individual investors’ unique financial goals and circumstances, resulting in suboptimal investment outcomes and higher tax burdens.
  • Data Management and Analysis: Personalized household investing requires significant data management and analysis. Advisors need to collect and analyze data on each client’s financial goals, risk tolerance, income, expense, and assets, among other factors. They must also collect a wide variety of data frequently, such as account holdings, recent account transactions, and updated constituents and allocations for indexes and investment models.
  • Resource Constraints: Personalized household investing is a time and resource-intensive endeavor, requiring dedicated investment and technology staff to provide personalized services to a large number of clients.

The Benefits of Portfolio Risk Optimization Technology

Portfolio risk optimization technology can help overcome the challenges of personalized household investing.  Portfolio risk optimizers can be somewhat daunting for advisors new to these methodologies. There is a steep learning curve  to understand how they work, how to take advantage of their inherent flexibility in managing client objectives and constraints, and how to integrate them into a wealth management workflow to gain maximum scale and efficiency.

Portfolio risk optimizers use algorithms and advanced risk models to rebalance a client’s household portfolio. Sophisticated methodologies are deployed that enable advisors to  consider multiple client objectives and constraints across accounts in the portfolio.  A portfolio risk optimizer uses the underlying risk information to determine the mix of investment assets that best  match the key risk factors that drive the client’s preferred investment target.

Unlike rebalancing systems that rely on literal translation of  the target’s underlying weights as the only determination for suggesting prospective trades, portfolio risk optimizers construct household portfolios that control risk and migrate portfolios closer to the client’s target while satisfying multiple client objectives simultaneously.

In a tax sensitive manner and during transitions that could take a few years to implement, portfolio risk optimizers  can build around highly concentrated positions in one or more accounts to achieve sufficient levels of diversification.  Additionally, portfolio risk optimizers help advisors manage client portfolios in line with a client-specific risk budget, tax budget, security restrictions, ESG preferences, and turnover constraints across various client accounts.

Portfolio risk optimizers can be integrated into an advisor’s workflow and environment through various web services, APIs, and SaaS platform offerings. These integrations help automate the processing of personalized household portfolios and make it feasible to monitor and process accounts on a daily basis.  With well-designed and configured portfolio risk optimization procedures, advisors can automatically and routinely determine the most optimal trades for each account in the household portfolio without a significant amount of time and personnel resources.

A General Framework for Deploying Portfolio Risk Optimizers in a Wealth Management Setting

For advisors to reap the benefits of using portfolio risk optimizers in a wealth management setting, it usually requires the advisor to rethink their client management process and framework.  Simply put, advisors must think about instituting a workflow that sequentially and simultaneously defines their client objectives, automates some of the decision making in constructing a personalized household portfolio, and leverages the technology for proper monitoring and rebalancing of accounts across their book of business.  All of this is wrapped around having the necessary infrastructure and a WealthTech platform designed to efficiently manage and process the client and investment data needed to bring personalized household investing to life.

Specifically, advisors must first collect and analyze data on each client’s income, expenses, tax rates, tax budget, assets, liabilities, risk tolerance, and investment horizon. Typically, this can be done through financial planning software that may be available within their practice.  Based on this information, they must define a general asset allocation policy that is most consistent with achieving their client’s goals and objectives.

Advisors then must provide necessary inputs to the portfolio risk optimizer to construct investment portfolios that are unique to each client’s financial goals and circumstances. The process involves defining a personalized investment target that accommodates the client’s required security and portfolio restrictions, income needs, ESG preferences, and tax budget for the entire household portfolio.

Finally, advisors must regularly monitor and rebalance each client’s personalized household portfolio to ensure it remains aligned with their financial goals and objectives as represented by the investment target for the household and its individual accounts. A well-designed “alert” system and process enables advisors to automate many of these tasks and therefore identify and address specific issues that may be in conflict with the objectives of the individual accounts or the aggregate household portfolio.

This framework ultimately can help advisors deliver to their clients a more personalized investment experience.  Advisors can keep a much clearer focus on achieving the client goals and objectives while also enabling them to growth their practice over time through more efficient scaling of household portfolio personalization.


As the wealth management industry continues to evolve, financial advisors must adapt to new technologies and solutions that can help them better serve their clients. Personalized household investing is one such solution, but its scalability has traditionally been a challenge. By leveraging WealthTech platforms that integrate portfolio risk optimization technology into advisor-friendly workflows, advisors can overcome these challenges and offer personalized investment services to a larger number of clients. The future of wealth management lies in the scalable implementation of personalized household investing.