How the Millers Unlocked an Extra $15,000 in Returns with ROCE Analysis

From Soccer Mom to Savvy Investor

Executive Summary

In today’s competitive RIA landscape, finding an edge for your clients is paramount. Discover how David and Sarah Miller, a busy family, used Golden Door Asset's ROCE calculator to unlock an extra $15,000 in projected returns over five years, simply by identifying and investing in companies with superior capital efficiency. This case study demonstrates how integrating AI-powered tools can transform client outcomes and free up advisors' valuable time.

The Challenge

The financial advisory industry is facing unprecedented challenges. Fee compression is squeezing margins, forcing advisors to deliver greater value with fewer resources. The evolving regulatory landscape, including the lingering impact of the Department of Labor's fiduciary rule, demands greater transparency and diligence in investment recommendations. At the same time, clients are becoming increasingly sophisticated, expecting personalized advice and demonstrable results. According to a recent Cerulli Associates report, the average RIA firm manages around $250 million in assets, highlighting the intense competition for attracting and retaining high-net-worth individuals.

For David and Sarah Miller, juggling demanding careers and raising three children nearing college age, these industry-wide pressures manifested as a personal struggle to maximize their investment portfolio’s potential. They felt overwhelmed by the sheer volume of stock choices and lacked a clear, efficient methodology for identifying companies that were truly making the most of their invested capital. Their advisor initially suggested a deep dive into Return on Capital Employed (ROCE) as a key metric for evaluating company performance, but the traditional method – manually extracting data from financial statements and performing complex calculations – felt daunting and time-consuming, an insurmountable barrier for a busy family.

When this problem goes unsolved, the consequences are significant. Underperforming portfolios lead to dissatisfied clients, increasing the risk of attrition. Manual analysis, while potentially thorough, eats into valuable advisor time that could be spent on client relationship management or strategic planning. Furthermore, missed opportunities for higher returns directly impact clients' ability to achieve their financial goals, potentially jeopardizing their retirement plans or their children's education. The cost of inaction extends beyond mere financial loss; it includes the erosion of client trust and the strain on advisor resources.

Our Approach

Golden Door Asset empowers advisors to overcome these challenges with AI-powered tools that streamline complex financial analysis. In the Millers' case, the Golden Door Asset ROCE calculator provided a clear and efficient path to identifying potentially undervalued companies and avoiding those with declining efficiency. Here's how it worked:

1. Data Input: The Millers' advisor accessed the Golden Door Asset platform and used the ROCE calculator. They selected a range of companies within the Millers' existing portfolio and potential new investments. For each company, they input the key financial figures: Earnings Before Interest and Taxes (EBIT) and Capital Employed (Total Assets less Current Liabilities). The platform simplifies this step by providing direct links to reputable financial data sources.

2. Instant Calculation: The ROCE calculator instantly processed the data, generating the Return on Capital Employed (ROCE) for each company. ROCE represents the percentage return a company generates from its capital employed, a critical indicator of profitability and capital efficiency.

3. Comparative Analysis: The platform allows for easy comparison of ROCE values across different companies, even within the same industry. The Millers' advisor compared the ROCE values of their existing holdings with potential new investments, allowing them to identify companies with demonstrably superior performance.

4. Strategic Reallocation: Based on the ROCE analysis, the Millers strategically reallocated a portion of their portfolio into companies with consistently higher ROCE values. This involved selling underperforming assets and investing in companies that were effectively generating more profit from their invested capital.

What makes this approach unique is its ability to democratize sophisticated financial analysis. Traditional methods often require extensive training and significant time investment, making them inaccessible to many advisors. The Golden Door Asset ROCE calculator streamlines the process, allowing advisors to quickly and confidently assess company profitability. This approach seamlessly integrates into an advisor's existing workflow, enhancing their ability to deliver personalized, data-driven investment recommendations. It’s not about replacing human expertise, but rather augmenting it with powerful AI-driven insights.

Technical Implementation

The Golden Door Asset ROCE calculator is built on a robust and secure cloud-based architecture. Key technologies and frameworks used include:

• Python: Python forms the backbone of the platform, providing the computational power for data processing and ROCE calculations. Its rich ecosystem of libraries, including Pandas and NumPy, facilitates efficient data manipulation and analysis.

• Flask: Flask, a lightweight and flexible web framework, powers the user interface and API endpoints. It allows for rapid development and deployment of the ROCE calculator, ensuring a responsive and user-friendly experience.

• PostgreSQL: PostgreSQL, a powerful and reliable open-source relational database, stores and manages financial data. Its ACID compliance ensures data integrity and consistency.

• Data Sources and Integrations: The platform integrates with reputable financial data providers, such as Refinitiv and FactSet, to access real-time and historical financial data. This ensures that the ROCE calculations are based on accurate and up-to-date information. APIs are used for seamless data retrieval and integration.

Security and compliance are paramount. The platform employs industry-standard security measures, including:

• Data Encryption: All data is encrypted both in transit and at rest, protecting sensitive financial information from unauthorized access.

• Two-Factor Authentication: Two-factor authentication adds an extra layer of security, requiring users to verify their identity through multiple channels.

• Regular Security Audits: The platform undergoes regular security audits to identify and address potential vulnerabilities.

• Compliance: The platform is designed to comply with relevant regulations, including SEC guidelines and data privacy regulations like GDPR. This provides advisors with the assurance that they are using a secure and compliant tool.

Results & Impact

The implementation of the Golden Door Asset ROCE calculator had a significant impact on the Millers' investment portfolio.

• Primary ROI: By reallocating $100,000 of their portfolio into companies with an average ROCE 3% higher than their previous holdings, the Millers projected an additional $3,000 annually in returns. Over 5 years, factoring in conservative compounding at 7%, this translated to approximately $15,000 in additional wealth accumulation.

• Time Savings: The quick, clear insights from the ROCE calculator saved the Millers' advisor at least 5 hours of manual analysis. This freed up time for more strategic client interactions and business development activities.

• Improved Client Confidence: The data-driven approach instilled greater confidence in the Millers' investment strategy. They understood the rationale behind each investment decision and felt more empowered to achieve their financial goals.

Here's a summary of the key metrics:

The Millers' experience demonstrates the tangible benefits of integrating AI-powered tools into financial advisory practices. By leveraging the Golden Door Asset ROCE calculator, they were able to unlock additional returns, save valuable time, and improve client confidence.

Key Takeaways

Here are some key takeaways for financial advisors looking to enhance their client service and improve portfolio performance:

• Embrace AI-powered tools: Explore how AI can streamline complex financial analysis and free up your time for client relationship management.

• Focus on capital efficiency: Return on Capital Employed (ROCE) is a powerful metric for identifying companies that are effectively generating profits from their invested capital.

• Data-driven decision making: Base investment recommendations on solid data and analysis, not just gut feelings or market trends.

• Communicate transparently: Clearly explain the rationale behind investment decisions to clients, building trust and fostering long-term relationships.

• Regularly review and optimize portfolios: Continuously monitor portfolio performance and adjust allocations as needed to maximize returns and mitigate risk.

Why This Matters for Your Firm

In today’s dynamic financial landscape, staying ahead of the curve is essential. The Millers' story illustrates the power of leveraging AI-driven tools to enhance client outcomes and improve advisor efficiency. By integrating the Golden Door Asset ROCE calculator into your practice, you can unlock similar benefits for your clients, generating higher returns, saving valuable time, and building stronger relationships. In a recent survey by InvestmentNews, 70% of advisors said they were looking to incorporate more technology into their firms in the next 12 months.

Golden Door Asset is committed to providing RIAs and wealth managers with innovative solutions that empower them to thrive in a competitive market. Our suite of AI-powered tools is designed to streamline complex financial analysis, improve decision-making, and enhance client satisfaction. Explore how Golden Door Asset can help you unlock hidden investment opportunities and deliver exceptional value to your clients. Visit our website or contact us today to learn more and schedule a demo.