Note: This article is courtesy of Iris.xyz
By Andy Hyer, Dorsey, Wright & Associates, a Nasdaq Company
With the rise of roboadvisors, advisors must bring more value to the table to earn each client’s business.
It’s a major shift from the days when strategic asset allocation was every advisor’s greatest offering. But today, almost everywhere you look, this service is provided online—for free. So how can today’s advisors compete? What can you offer from the very first interaction with a prospect that sets you apart, ensures value for your fees, and gives your prospect the assurance that your offerings have the potential to deliver very real, long-term value?
The solution is simple. And while it may feel a bit like treading new waters for advisors who have built their practices around traditional strategic asset allocation, when you dive into the details, this solution will not only feel familiar, but it will give you a new degree of confidence in your ability to deliver stronger outcomes for your clients.
What is this simple solution? At Dorsey, Wright & Associates, a Nasdaq Company, we use the DWA Research Platform and its asset class ranking tool called DALI (Dynamic Asset Level Investing). Based on the reality that every asset class goes through bull and bear markets, DALI leverages these inevitable market shifts to marry tactical and strategic asset allocation, using real-time research to analyze the relative strength of market sectors, asset classes, regions, and even individual stocks. It then allows advisors to identify and capitalize on market opportunities based on actual market trends. Unlike tools that attempt to forecast where stocks are heading tomorrow, DALI ranks the relative strength of any given asset compared to other similar assets to quickly and easily pinpoint buy and sell signals based on the asset’s upward or downward momentum. And while DALI can certainly be used as a pure active management tool, many advisors, especially those struggling to combat the threat of roboadvisors, are using it today to bolster their client portfolios with the strongest possible assets and introduce a whole new level of diversification.
The process of DALI is a lot like a giant arm wrestling match.
Instead of picking specific assets based on intangibles such as quarterly forecasts, DALI takes a representative sample from each asset to create an equation-based Relative Strength Matrix that clearly shows the winner and the loser. Here’s an example:
Emerging markets are very strong right now for the first time in years. To leverage this trend, you want to recommend adding an emerging market ETF to your client’s portfolio. Using DALI, you have all the talking points you need. You can sit down with the client and present a visual representation of 1) the upward momentum of emerging markets compared to other asset classes, and 2) which emerging markets are exhibiting the greatest strength. Based on the numbers, you recommend adding a Latin America ETF to leverage this opportunity. Using DALI, you can then compare the 23 available Latin America ETFs to identify which ETF is exhibiting the greatest strength at the moment based on actual numbers. The evidence of the trend is clear, making it easy for your client to understand the reasoning behind your recommendation. The process has suddenly gone from conjecture to fact, all because DALI painted a very clear picture of where the strengths and weaknesses exist across the market. Just like in arm wrestling, the winners and the losers are crystal clear.