Core-satellite investing in the digital era

Core-satellite investment strategies nowadays give banks an opportunity to meet clients’ needs effectively by addressing their specific interests and preferences. Finfox allows to frame high conviction investment themes in an appealing and dedicated format and set new standards in terms of client centricity and client experience in wealth management.

Core-satellite investment strategy

A core-satellite investment strategy focuses in the core portfolio on diversification to minimise investment risk and yield risk-adjusted returns in line with the market on the long term, while the satellite investments in selected high conviction areas can be used to position content or tactical priorities that reflect the client’s interests, value-based goals or other preferences.

A good example for the core-satellite approach is ESG by aligning the satellite modules with the United Nations Sustainable Development Goals (SDGs), or deliberately forgoing a market-driven return in a satellite in favour of impact investing topics.

With the satellites, a bank can effectively use its expertise in key areas to differentiate itself and convey value-add to its clients as well as ideally strive to create alpha for the investor.

An engaging approach to address clients with targeted satellite modules

The core-satellite approach gives banks an opportunity to create a nuanced range of investment buckets and to communicate with clients more clearly and transparently. Descriptive module fact sheets give clients the ability to read all the information they need for themselves and explore specific investment topics in more detail. This enables banks to make complex subject matters more accessible to clients and to give them a chance to benefit more from the findings of the research team. In addition, clearly presented client reports provide detailed portfolio analysis and appealing visualisations of the portfolio performance. This structured and varied presentation of information allows clients to connect with satellite-related content in a flexible and attractive way and enhances their digital engagement.

Core-satellite approach in the advisory meeting

FinfoxTouch, the tablet-based tool for interactive investment advice, allows advisers and their clients to put together the core and satellite modules quickly and easily in the advisory meeting to suit the clients’ preferences and create personalised core-satellite portfolios.

The client-centric FinfoxTouch tool offers the following benefits:

• Intuitive: the preferred core and satellite modules can be selected easily in just a few clicks either before or during a personal meeting
• Easy to manage: it provides a central hub for all information pertaining to the bank’s core and satellite modules
• Transparent: it provides full transparency regarding performance and costs in the satellites
• Compliant with regulations: the tool is part of an advisory process that complies with the relevant regulations and ensures that they are adhered to at all times

The Finfox core-satellite module supports various bank services. For example:

• A discretionary mandate
• An advisory mandate based on a combination of core and satellite modules
• An advisory mandate based on single positions enhanced by theme-based satellite modules

Spotlight on focus themes and increased client experience

Banks can use the satellite positions to shine more of a spotlight on themes and offerings that set them apart from the competition (ESG, crypto assets, etc.). There is a separate and clearly defined investment bucket for each chosen satellite module. Any client queries regarding the allocation of the various investment buckets or the impact of a particular module on the performance of the overall portfolio can be answered precisely thanks to dedicated reporting for each bucket.

This leads not only to greater transparency but also to clients engaging and identifying with their investments to a greater extent. Higher client engagement usually means higher client satisfaction as well. Thus, core-satellite investing offers banks an opportunity to tap into fresh potential in the wealth management space by effectively putting the client experience first.

This article was published in The WealthTech100 2024 Report by FinTech Global. Read the full Finfox feature (PDF) here.