The Paradox of “Personalized” Portfolios

Pave was built to address the paradox underlying current understandings about “personalized portfolios.” To truly personalize a portfolio, you may have to look beyond an asset's easily identifiable characteristics (e.g., price action, management team, brand, industry) to the factors that are driving performance at any given time. Only then can an advisor build a portfolio that reflects a client's values and financial goals.

A scene from the movie Moneyball serves as the perfect metaphor for the difference between current approaches to portfolio management and Pave Pro. In it, a baseball manager (Brad Pitt) and his team are trying to replace a star player who was very important to their team's success. The older scouts are trying to find a like-for-like replacement, but the manager has a different idea.

In the scene, Brad Pitt says that instead of trying to replace Giambi (the star player) with a like-for-like swap, an impossible task, they will recreate him in the aggregate.

Historically, wealth managers have relied on direct indexing and tax loss harvesting, which both lean on surface-level asset assessments to achieve risk and return goals. These systems lack the flexibility to do so while accommodating nuanced personalization.

Pave Pro enables a new generation of advisors to look beyond the surface to build portfolios that can replicate a benchmark’s risk profile in the aggregate. Advisors no longer need to own roughly 500 stocks to replicate the S&P 500; now, they can do so with less than 100. 

With Pave Pro, advisors can accommodate client asset allocation requests down to the individual stock without increasing the portfolio's risk beyond accepted levels. Does your client need their portfolio to be 10% in TSLA and have 0 tobacco stocks while not exceeding the risk of the S&P 500? In just a few seconds, Pave Pro can build a portfolio that meets those goals, keeps tracking error to the benchmark within a few percent, and aims to generate alpha through optimized asset choice and allocation.

Welcome to the next generation of wealth management.

To learn more, please reach out by emailing sales@pavefinance.com.

“Pave Pro has the potential to save my firm millions each year by replacing our 3rd party managers.” - RIA, $500M AUM¹

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Disclaimer

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1. Testimonial provided by Josh Allen in April of 2024. Josh is a current client of Pave Finance, Inc. No compensation was provided in exchange for this testimonial.

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