proposal-generation

What this skill does

# Proposal Generation

## Purpose
Guide the end-to-end creation of investment proposals for wealth management and advisory firms. This skill covers the complete proposal workflow — from prospect data collection and risk profiling through model portfolio recommendation, fee illustration, performance projections, compliance review, and proposal delivery. It enables a user or agent to design, build, evaluate, or automate proposal generation systems that convert prospects into advisory clients while satisfying regulatory requirements for performance presentation, fee disclosure, and suitability documentation.

## Layer
10 — Advisory Practice (Front Office)

## Direction
prospective

## When to Use
- Generating an investment proposal for a new prospect or existing client considering additional assets
- Mapping a risk questionnaire score to a recommended model portfolio
- Building the asset allocation and holdings detail section of a proposal document
- Creating fee illustrations that show tiered advisory fees, fund-level expenses, and total cost of ownership
- Producing Monte Carlo projections or historical scenario analysis for a proposed portfolio
- Analyzing a prospect's current portfolio to quantify improvement opportunities (risk reduction, cost savings, tax efficiency, diversification)
- Reviewing a proposal for compliance with the SEC Marketing Rule, advertising rules, and suitability requirements
- Designing proposal templates and workflows for a multi-advisor firm
- Evaluating or selecting proposal generation technology (Orion, Black Diamond, Riskalyze/Nitrogen, MoneyGuidePro, RightCapital)
- Standardizing model portfolio lineups and ensuring consistent recommendation rationale across advisors
- Preparing transition analysis showing the cost and tax impact of moving from an existing portfolio to a recommended portfolio

## Core Concepts

### Proposal Workflow Architecture
The investment proposal is the centerpiece of the advisory sales process. It translates a prospect's financial situation and goals into a specific, actionable investment recommendation. The end-to-end workflow proceeds through defined stages:

1. **Discovery meeting** — the advisor meets with the prospect to understand their financial situation, goals, concerns, and expectations. The advisor collects current account statements, tax returns, and any existing financial plan. The discovery meeting establishes the advisory relationship's tone and sets expectations for the proposal.
2. **Data collection and organization** — the advisor or operations team enters prospect data into the proposal system: personal information, current holdings (manually or via account aggregation), financial goals, time horizons, income, expenses, tax situation, and any unique circumstances (concentrated positions, restricted stock, estate planning needs).
3. **Risk profiling** — the prospect completes a risk tolerance questionnaire. The system scores the responses and produces a risk profile that maps to a position on the firm's risk-return spectrum. The risk profile is the bridge between subjective client preferences and objective portfolio construction.
4. **Model portfolio selection** — the risk profile score maps to a specific model portfolio from the firm's lineup. The advisor reviews the mapping, considers any client-specific factors that might warrant adjustment (tax sensitivity, income needs, ESG preferences, concentrated positions), and confirms the recommended model.
5. **Current portfolio analysis** — if the prospect has existing investments, the system analyzes their current holdings: asset allocation, risk metrics, expense ratios, tax lots, concentrated positions, overlap, and style drift. This analysis quantifies the gap between the current portfolio and the recommended model.
6. **Proposal document generation** — the system assembles the proposal document from templates, populating it with client-specific data, the recommended portfolio, fee schedule, projections, and disclaimers. The proposal document is the deliverable that the prospect reviews and uses to make their decision.
7. **Compliance review** — before the proposal is presented, it undergoes supervisory review to verify suitability documentation, performance presentation compliance, fee disclosure adequacy, and proper disclaimers. For firms subject to the SEC Marketing Rule, proposals that include performance data require additional scrutiny.
8. **Presentation and discussion** — the advisor presents the proposal to the prospect, walks through the analysis and recommendation, answers questions, and addresses concerns. The presentation meeting is where the advisory value proposition is demonstrated.
9. **Revision and finalization** — based on the prospect's feedback, the advisor may revise the recommendation (different model, adjusted allocation, modified fee structure) and regenerate the proposal.
10. **Acceptance and onboarding** — the prospect accepts the proposal by signing the advisory agreement (IMA or similar). The proposal data flows into the onboarding process: account opening, funding, and initial investment in the recommended model.

The workflow is iterative, not strictly linear. Prospects may request multiple revisions, ask for comparisons between different models, or bring additional assets into scope after the initial proposal. The proposal system must support version tracking and efficient regeneration.

### Risk Profiling and Model Mapping
Risk profiling is the foundation of the proposal recommendation. The risk questionnaire produces a quantitative score that determines which model portfolio is appropriate for the prospect.

**Risk questionnaire design:**
- Questionnaires typically contain 10-25 questions assessing both willingness (behavioral/emotional tolerance for loss) and capacity (financial ability to absorb losses without jeopardizing goals).
- Common question formats include: scenario-based loss tolerance ("If your portfolio lost 20% in a month, would you sell, hold, or buy more?"), time horizon assessment, income stability evaluation, and investment experience self-assessment.
- Scoring produces a numerical result (e.g., 1-100) or a categorical classification (Conservative, Moderately Conservative, Moderate, Moderately Aggressive, Aggressive).
- Third-party risk profiling tools (Riskalyze/Nitrogen, Tolerisk, FinaMetrica) provide validated, statistically tested questionnaires with defensible scoring methodologies. These are preferred over home-built questionnaires because they have undergone psychometric validation and are widely accepted by regulators.

**Model portfolio lineup design:**
A typical advisory firm maintains 5-10 model portfolios spanning the risk-return spectrum:

| Risk Score Range | Model Name | Equity/Fixed Income | Expected Return Range | Expected Max Drawdown |
|-----------------|------------|--------------------|-----------------------|----------------------|
| 1-20 | Conservative Income | 20/80 | 3-5% | -8 to -12% |
| 21-35 | Moderate Conservative | 35/65 | 4-6% | -12 to -18% |
| 36-50 | Moderate | 50/50 | 5-7% | -18 to -25% |
| 51-65 | Moderate Growth | 65/35 | 6-8% | -25 to -32% |
| 66-80 | Growth | 80/20 | 7-9% | -32 to -40% |
| 81-100 | Aggressive Growth | 95/5 | 8-11% | -40 to -50% |

Each model is defined by a strategic asset allocation with target weights and permissible ranges for each asset class, along with specific fund or ETF selections that implement the allocation. Models should be reviewed and rebalanced on a defined schedule (typically quarterly or semi-annually).

**Suitability alignment:**
The risk profile alone does not determine the recommendation. The advisor must also consider:
- **Time horizon** — a young investor with a long horizon may be profiled as moderate but could reasonably be placed in a growth model, while a retiree with the same risk score needs more conservative positioning due to sequence-of-returns risk.
- **Income needs** — a prospect requiring