Introducing

The Private Banking Advisor Tool

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We have recently developed a unique financial planning tool that will enable you to assess the return potential and risk of your portfolio. Your Private Banking Manager will introduce this tool to you.

At Private Banking we work with clients to manage their wealth and to build investment strategies that reflect each client’s unique financial goals and objectives. However, investment returns are variable and it’s important to understand the likely investment journey that your portfolio could experience as you progress towards meeting your financial goals.

Using the Advisor Tool your Private Banking Manager will take you through the following steps:

Step 1: What does your current financial position (your assets and liabilities) look like? What are your financial goals?

Step 2: Looking at the allocation of your financial assets, is your future lifestyle at risk in different investment scenarios?

Step 3: How can we reallocate your portfolio to work better at meeting your financial goals and minimising losses?

By going through this process you should gain a better understanding of the likely market outcomes and your portfolio should be allocated to achieve your goals and minimise risks. Financial modelling can help demonstrate the probable investment outcomes.

Portfolio Modelling?

Private Banking uses financial modelling techniques to identify the likely future investment returns that could be delivered by individual asset classes and portfolios. Portfolio Modelling is the application of these financial modelling techniques to multi-asset portfolios.

We have incorporated portfolio modelling tools in our financial planning activities for a number of years. However, we are constantly seeking to enhance the reliability and content of these tools and the Advisor Tool introduces these enhancements to our clients.

Moody’s Analytics provide the underlying asset class data that underpins our forward-looking portfolio modelling. Private Banking has formed a relationship with Moody’s Analytics and is the only wealth manager in Ireland using Moody’s for this purpose.

We receive data relating to the full range of asset classes. Using multiple market and economic factors we incorporate forward-looking estimates to identify likely future returns.

Understanding your financial goals

To identify the investment approach that’s right for you we must first gain an understanding of your personal assets – including your investments and other assets – and expected future cash flows (such as employment income, windfalls, asset sales etc.).

We then need to spend some time getting to know your specific financial goals and to understand what’s important to you in the context of your available assets. We seek to help

The Private Banking Advisor Tool

The Private Banking Advisor Tool

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you to quantify these goals and assign priorities to them. This will include identifying your immediate spending needs, your likely future asset purchases (perhaps a new home for you or your children), how you will replace your income in retirement and your longer term wealth plans for your family or charity interests. We seek to allocate your financial goals into one of three ‘wealth pools’ – Current, Capital and Aspirational.

Your pools of wealth

This will help to address the reality of short, medium and longer term planning to ensure that you have adequate resources to meet your needs from each of those pools. It will also help you to capitalise on the opportunities which are presented with medium and longer term investing.

Our aim is to provide you with clarity around what you actually want your money to do for you and how your investment portfolio can contribute towards you achieving success – which we define as meeting your goals with the highest degree of confidence.

The key inputs

In order to build the right portfolio for you, we need to understand three aspects of your investment personality:

1. Your target return – the average annual percentage return that your portfolio needs to generate in order to meet your financial objectives.

2. Your risk attitude – the level of risk that you are willing to take in your portfolio. We focus on (i) the possible falls that your portfolio could experience during the investment period and (ii) the risks of capital loss at the end of the period.

3. Your time period – the length of time you are willing to invest for - typically between 5 and 20 years.

The Private Banking Advisor Tool

Driving the modelling engine

Barrie & Hibbert (B&H) was established in Edinburgh in 1995 to help a diverse range of companies to manage financial risk. In 2003 they launched their first standalone Economic Scenario Generator (ESG). With more than 150 customers around the world, the ESG is widely recognized as an industry standard for valuing and projecting assets and liabilities and assessing risk and capital positions. The Moody’s Corporation acquired B&H in 2011 and it is now part of the Moody’s Analytics Risk Management Software division.

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The Private Banking Advisor Tool

Scenario Analysis

This tool will enable us to look at different scenarios, aligning your assets with their identified purpose, and identifying and assessing trade-offs between the returns sought and the likely risks being taken.

Returns, Risk and Asset Allocation

We hope that this conversation, and examination of different scenarios, will help you to identify whether your assets are sufficient to meet your identified financial goals and whether your investment and pension portfolios are being managed appropriately.

We want you to feel comfortable with the assumptions that we have made in relation to estimated future returns and the risks associated with different assets and portfolios. We aim to measure the probability of ‘success’ – whether your portfolio is capable of meeting your return target, given your risk profile and period of investment.

The probability of success

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Bespoke portfolio for you

Once we have identified the risk profile that you are comfortable with your Private Banking Manager will identify where your current portfolio fits on the risk/return spectrum and will discuss with you how it might be altered to better deliver against your return requirements, given your risk tolerance. We will then construct an investment portfolio with an asset allocation that is designed with your goals in mind. Using the Moody’s Analytics software we will conduct a bespoke testing of possible portfolios using 10,000 iterations to identify the most suitable risk and return profile for your portfolio.

Sample portfolio allocation

Following this conversation we hope that we will have a greater understanding of your long-term strategy. And when the inevitable bout of market uncertainty arises we hope that you will have the confidence to stick to this long-term strategy and avoid making unnecessary changes during times of market volatility.

As mentioned previously, your Private Banking Manager will take the opportunity to take you through this analysis tool. We hope it stimulates some thinking about your financial goals and how you can best meet them. We would welcome your feedback and suggestions as to how we can further assist in managing your wealth to meet your goals.

The Private Banking Advisor Tool

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Bank of Ireland Private Banking Limited

PO Box 1247840 Mespil Road, Dublin 4

+353 1 637 8600Fax: +353 1 637 8631

Dockgate House, Dockgate, Galway

+353 91 566 301Fax: +353 91 565 437

32 South Mall, Cork

+353 21 425 1527Fax: +353 21 425 1539

www.privatebanking.ie

Bank of Ireland Private Banking is regulated by the Central Bank of Ireland. A member of Bank of Ireland Group.