This post is primarily for financial advisors although some retail investors might find it interesting to see.

I’ve spent a good part of the last year building out a software tool called HourglassFP Pro. This is the client facing tool that I use for the Defined Duration strategy. As far as I know there are virtually no asset-liability matching tools that systematically quantify someone’s liabilities and match them to specific assets. There are some general “bucketing” frameworks out there, but bucketing strategies aren’t true asset-liability matching strategies. A good ALM strategy should specifically match certain goals and spending needs to specific assets. That’s what this tool does.

This is, in my opinion, a massive improvement over the traditional Modern Portfolio Theory approach because it builds the portfolio specifically to match a financial plan and client goals. It doesn’t just slap together a diversified portfolio with a bunch of factor tilts and styles that communicate nothing to the client (and actually create more conflicts and confusion than anything else). This approach starts with a financial plan, helps the client set specific goals and then creates an asset allocation that communicates a clear role for every asset relative to the client’s actual financial needs and goals.

I’ve had a handful of advisors reach out to me to see the tool and there were some questions specifically about how I utilize it and think about certain elements. For someone who isn’t familiar with ALM strategies or my Defined Duration strategy it can be a little confusing and the outputs in the original version weren’t all that clear. I recently did a big upgrade of the software and added a number of new elements. It now does the following:

  • Comprehensive short-term goals matching to help establish clear goals that need to be funded over predictable shorter time horizons.
  • Quantitative risk scoring. This is a financial risk capacity measurement, not your old school behavioral risk tolerance measurement.
  • Customizable portfolio construction with options for portfolio insurance, TIPS ladders, factor tilts and bond tents.
  • Real-time tbill optimization for your short-term allocation.
  • An ETF only option for the investors who don’t want to roll bills.
  • The asset-liability mapper which shows exactly how Portfolio Builder constructs the different matches across its components.
  • A sequence of return risk analyzer to help clients understand how the portfolio might expose them to different scenarios.

Here’s the full demo video. I hope some of you find it helpful. If you’re an advisor who wants access to HourglassFP Pro you can register here. And if you have feedback or questions I’d love to help however possible.