Advisers need to present other modelling techniques to clients

pensions

Stochastic modelling is routinely used by banks and life companies to measure and manage the risks their investments pose. Now that specialist pension providers are starting to use it, it should be possible to closely match asset allocation to risk profile

It is surely one of the greatest ironies of financial services regulation that perhaps the most misleading of sales tools is prescribed by the FSA. Not only do deterministic, that is to say, fixed rate personalised illustrations, provide a staggeringly narrow impression of how a product might perform, but the view they give is an entirely positive one and takes no account of how the underlying portfolio is constructed. Soon, however, we may be able to put all this behind us with the emergence of a new generation of planning tools that can model investors' portfolios. These allow IFAs and t...