08-12-2020 By Thomas Peter Clausen, CEO
Ubanking.dk is an interactive User-driven platform for building with professional tools those future wealth plans, today only expensively offered in banks.
Essentially Ubanking.dk along with its Nordic counterpart, Formuetesten.dk, constitutes an API for investors. An API solution banks have been encouraged to build for a decade now by independent bank analysts.
An API for professionally creating and building global investment solutions that solves elegantly and credibly, all challenges documented to be Private Investors largest challenges versus professional managers in banks.
Ubanking.dk and its global investment solutions, are founded on a broad set of ETF asset classes for bonds and equities. All with
1) 100% diversification
2) Optimized asset class structure
3)Highest expected return possible for a given risk.
4) Lowest costs (market costs on ETF)
5) ETF selection fitted to User nationality
Most often these wealth plans or portfolio constructions, can only be made in headquarters of banks by highly skilled PhD’s.
Ubanking.dk has calibrated all these smart professional tools into a user-friendly setup for Users or investors of all levels to intuitively apply.
The platform is a dynamic engine that works with current market expectations of risk and return. The engine is pre-designed (the “auto” function) to produce a set of solutions that all solve the 4 challenges above.
Ubanking.dk has two core features or pillars.
Both of which addresses Private Investor objectives and current challenges and both constructed to neutralize the investment advantage of professionals versus private investors.
Substantially this implies that the difference between these two groups in Ubanking reduces to a flip-of-a-coin. Randomness.
A simple feature, and a less simple feature for investors to build fast, intuitively and credibly, a wealth plan (portfolio), that captures highest return (and lowest costs) for lowest risk possible risk in the global financial markets.
The simple approach takes User/Investor through a few country specific steps, where only little interaction from User is required in order for the Robotically-driven system to deliver a professional and User risk-driven or risk-appetite driven global ETF asset class portfolio.
The other approach is User-flexible, and includes several professional tools and functions for User to intuitively apply, with the aim of building a more tailored portfolio. It also includes an industry unique Pension tool, where dissavings (consumption) expectations can be applied in the initial portfolio creation.
In this note we focus on the simple approach. A standardized and direct solution for all investors.
Short background for Private Investors
For 5 years now, an exponentially increasing number of investors have realized that the world of financial products and technology, have radically changed in favour of all private investors looking for fast, cheap and transparent access to future global market returns. Looking for the decade-long academically recommended investment approach.
The now vast ETF (Exchange-Traded-Fund) family of diversified funds, and also mutual index funds, today offer a significant added return that previously went into the hands of banks. A subtracted cost in funds is an added return for investors in those funds.
Annual passive costs (or price) are now more or less at the competitive margin of fund construction and maintenance costs. The impact of this industry change, cannot be underestimated and is essentially measured on an aggregate macroeconomic level.
It follows from a basic Keynesian logic, that GDP increases when Billions of dollars are transferred from low-propensity consumers, senior bank employees and stockholders to high-propensity-to-consume private investors.
Private Investor Objectives and Challenges
Notwithstanding individual investor preferences like local company support or nice logos, then we say that private investors have identical investment objectives as professional investors.
Namely, harvesting highest expected return for lowest risk possible, in a transparent way and often with home-bias in equities. Home-bias is a well-known concept describing investor’s tendency to keep a relatively high weight in local equity.
Theoretically and empirically this is achievable by building a portfolio founded on many different assets and asset classes with low correlation in between them.
In practice this involves building a global investment portfolio with or without currency risk and with lowest possible costs associated.
However, research globally concludes that 95-99%% of Private Investors have too little diversification.
Too few assets and much too low Sharpe Ratio compared to Professionals.
ETF funds and not active mutual funds
Although empirically and theoretically rejected, the active management industry still exists. To a large extent still due to and manipulations of the Efficient Market Hypothesis (EMH), that fallaciously implies full rejection of any active gains.
So, whenever just one bank has achieved perhaps by luck this gain the passive case has been doubted. Or whenever Warren Buffet has made some great trades, it has been seen, as evidence against this EMH, followed by a rejection of the academically well-supported claim that active management is fruitless on average.
However, when professionals and academics build portfolios, they assume an expected (excess) gain of zero and focuses on core asset classes as equities and bonds in various regions or nations.
Passively managed or indexed ETF’s are made exactly for this portfolio construction. Costs are lowest possible, that is returns are highest possible for a given 100% diversified risk level.
Adding to that is transparency of what sector, countries, regions and asset class, investor is exposed to. A world all-in diversified ETF is likewise available in the market however it fails the transparency objective.
How Ubanking solves Private Investor objectives
Ubanking.dk is a simple and intuitive investor platform, yet extremely complex and professional underneath. The complex universe below (the platform), not only stems from the mathematical and financial calculations, but also functionalities to dynamically give User an intuitive experience above.
It works like a flow, where User decides on her country and subsequently answers 3 simple questions meant to define a default setting in the eventual investment dashboard.
In the standardized flow that can be tracked for free User immediately in the dashboard gets a full description of the system-build portfolio based on risk aversion. User can go directly to Trade View and see all ETF instruments selected, ISIN codes, costs etc. From there a report can be generated in PDF or sent to E-mail.
But the core simple solution is that User with just a few clicks can build the highest return – lowest risk portfolio available in the financial market.
All solutions are dynamic and recalibrated so in 2 months time, the configuration could be different.
In the next post we will describe the User-driven functionality on Ubanking.dk, where user can manually create and modify her portfolio based on subjective assessments of future returns, costs etc.