The Next Step After Aggregation and Normalization
Empower Advisors and Investors
After using Envestnet | Yodlee to aggregate and normalize financial data from 21,000 data sources, data is ready for asset classification.
As a supplement, the Asset Classification Service applies asset class, sector, geography, and risk-and-reward classification types to stocks, bonds, mutual funds, and other assets in investors’ portfolios. This makes it easier for advisors to review, scan, and sort data for increased insights and streamlined investment reporting.
Clearer Risks. Greater Rewards.
Risk and reward ratios enable investors to compare their holdings to their risk preferences. Advisors can also use risk and reward data to provide portfolio diversification and re-balancing strategies in their clients’ best interest. Additional classifications enable advisors to better understand their clients’ unique situations to enhance advisor-investor consultations and increase client loyalty.
What Is The Purpose Of Asset Classification?
Asset classification, the system of assigning investments into groups or categories that have similar characteristics, shows how assets are distributed in a portfolio. Financial advisors rely on asset classification to identify when investors are over or under diversified based on their goals, age, risk tolerance, and personal preferences. Automated asset classifications and style predictions can empower intelligent portfolio rebalancing decisions for investors and help investors guard against market volatility. Learn more about asset classification in our on-demand webinar and how to make the move to higher quality investment account data.
Types of Asset Classification
Historically, the main asset classes are equities (stocks), bonds (fixed-income securities), and cash or cash equivalents (like money market funds, Treasury bills, corporate commercial paper, marketable securities, and short-term government bonds). Today, most financial advisors have broadened their scope to focus on additional asset classes such as real estate, cryptocurrencies, and valuable inventory (artwork, stamps and other tradable collectibles). There are also different types of sub-asset classes based on geography, industry sectors, market capitalization (large-cap, mid-cap, small-cap), and other criteria.
Asset classes vary in terms of the level of risk, performance in different market conditions, and their potential to deliver returns. Correctly classifying investment assets is critical for managing investors’ risk exposure and providing the most strategic investment advice.
