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Nebo is an open architecture asset management platform that implements a goals-based investing framework by coherently melding financial planning and asset management for registered investment advisors.

Nebo allows advisors to (i) test the viability of a plan using customized glide paths and next-generational Monte Carlo simulations and (ii) build portfolios for today based on current market conditions.

Since 2000, we have seen an enormous shift in the wealth management industry, where almost $10 trillion have shifted from brokers to advisors. Most assets are outsourced into cookie-cutter portfolios where risk is based on volatility. These portfolios are also untethered from the financial plan. Consequently, advisors need more confidence that they have their clients in the right portfolios.  

Nebo is an enormous step forward for our industry because it defines risk – not as volatility – but more intuitively as ‘not having what you need when you need it.’ Nebo builds portfolios to minimize this very personal risk allowing advisors to personalize portfolios in a manner that efficiently enables them to scale their business.

A better definition of risk and a more personalized portfolio inspires confidence in both the advisor and the client that the client’s portfolio aligns with their financial plan. This is personalization for economic reasons because nothing else matters if you don’t get the portfolio right.

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As a global asset management firm co-founded by Jeremy Grantham with a long history of thought leadership rooted in valuation and independent thinking, one of our guiding principles is “if you do right by the client, everything else takes care of itself.” In the context of Nebo, doing right by the client means building a platform that operationalizes our insights about risk, mean reversion, the importance of how you model return-generating processes, etc., leading to better portfolios for asset owners and better businesses for advisors.
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GMO has always had very strong views about how investors should think about risk. In our multi-asset portfolios, risk has always been defined as the ‘permanent impairment of capital’ because that is the risk investors care most about. As we thought about saving and investing for retirement, we observed that the investment industry was yet again focused on the wrong thing. Risk was defined, to the extent, it was defined at all, almost exclusively as volatility.
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In the years since, we fleshed out the conceptual ideas and built a Goals-Based investment platform – Nebo – to operationalize the framework.

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Two things make Nebo unlike anything else in the asset management industry: 

1. Breakthrough thinking in how risk is conceptualized and operationalized.
2. Institutional quality asset management accessible to individuals.

Nebo is driven by the principle that the most critical risk you face is not having the financial resources you need when you need them versus the conventional view of risk as volatility. Nebo then builds portfolios that minimize this critical risk.

A key benefit of defining risk this way is that it naturally connects the financial plan with the portfolio, solving a key advisor pain point: lack of confidence that the portfolio is aligned with the plan.

Nebo is the operating system aligning the portfolio with the plan. It is the goals-based portfolio construction engine that sits at the heart of the advisor’s workflow.

Nebo picks up where your planning tools leave off. Using the cash flows from your planning tools, you determine the return your client needs from their financial assets to achieve their wants or needs. Based on the client’s goals, Nebo constructs a portfolio specifically optimized to minimize the risk that the client falls short of their goals. This is personalization for real economic reasons, not marketing reasons.

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Nebo is built on nearly a decade of deep research and a three-year process of user-led development with an initial cohort of early adopter RIAs. These advisors  provided invaluable feedback and input, ensuring that Nebo meets the needs of fiduciary advisors from day one. The continued evolution of Nebo is a collaborative process between a growing cohort of advisors and the Nebo team.

GMO has a history of investment innovation. We were: one of the first institutional equity managers for international equities in the 1980s as well as one of the first quantitative equity managers in the 80s, one of the early investors in emerging markets (both equity and debt) in the 90s, and one of the first dedicated quality portfolios in the 2000s. Nebo is another investment innovation building on the insights gained in over three decades of managing multi-asset portfolios.

Nebo applies to all kinds of investors, including high net worth and ultra-high net worth. All investors have needs and wants, and Nebo helps advisors construct portfolios that minimize the risk of investors falling short of their goals - whatever these goals may be.

1. Mass affluent - Nebo minimizes the risk that clients ‘do not have the financial resources they need when they need them.’ This shortfall approach applies to the accumulation and decumulation period for mass affluent investors ensuring portfolios are aligned with the client’s financial goals and personalized to minimize the critical risk of having the desired financial resources in retirement.
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2. High net worth - Nebo’s framing of risk applies just as much to high net worth clients as it does to mass affluent clients. This is because Nebo minimizes shortfall relative to needs or wants. In other words, framing risk as ‘not having what you want, when you want it’ is just as valid as framing risk as ‘not having what you need when you need it.’ 
    
3. Ultra-high net worth - Even though ultra-high net worth clients are unlikely to run out of money, they still have goals for their financial assets, e.g., charitable activities, family legacy, bequests, etc. The notion of risk as not achieving these goals, i.e., ‘not having what you want, when you want it,’ applies equally well. 

In all cases, Nebo illustrates the tradeoffs involved for different choices of Target Compound Return and how that impacts wealth over time, allowing advisors and clients to determine the most appropriate Target Compound Return (and constraints) to achieve their goals. Nebo then builds personalized portfolios to minimize shortfall relative to those investment goals, accounting for current market conditions. 

In short, Nebo’s multi-period shortfall optimization has the flexibility to create personalized portfolios for investors that run the gamut of wealth, time horizon, and sophistication.

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Pricing is value-based. We work with advisors to understand their business, use case, and how Nebo fits into their ecosystem. In keeping with our mantra that “if you do right by the client, everything else takes care of itself,” we then structure a relationship that benefits both the advisor and their clients.

Interested in a custom pricing proposal? Schedule time to talk to the team.

Goals-based solutions require hyper-customized portfolios. Until Nebo, this capability did not exist within the industry. 

Nebo is unique among wealth solutions, combining personalization, scale, and approach. 

Nebo helps advisors build personalized portfolios for each client based on a new definition of risk. Rather than risk as volatility, Nebo defines risk as "not having the financial resources you need or want, when you need or want them." This allows advisors to align clients' portfolios with their financial plan specifically. Furthermore, it increases each advisor's efficiency,  productivity, and differentiation. 

Advisors use Nebo to build portfolios that minimize each client's unique risk – the risk that your client does not have what they need or want when they need or want it. 

By redefining risk as 'not having what you need, when you need it,' Nebo efficiently personalizes portfolios. Advisors use Nebo to build the portfolio best suited to their financial plan. By using Nebo, RIAs will meaningfully improve client portfolios. Our research suggests that when measured in annual return units over a full-market cycle, the combined direct benefits are approximately 100 – 250 bps per annum. 

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Nebo is driven by the principle that the most critical risk is not having the financial resources you need when you need them. With Nebo, we build better portfolios, achieving higher levels of alignment with individual financial goals and reducing the risk that those goals are not met. Financial assets should serve the purpose of funding lifetime financial goals.

1. Better aligned portfolios – portfolios aligned with the financial plan – i.e., minimizing the risk that clients don’t have what they need when they need it – increase the odds that investors own the portfolio best suited to their needs, wants, and circumstances.
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2. Focus on what matters – Nebo’s framing of risk changes the nature of conversations with clients, focusing on the key objective - having what they need when they need it - instead of getting distracted by the market or economic fluctuations.
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3. Understanding tradeoffs – Nebo enables the advisor to articulate the tradeoffs between long-term wealth accumulation and the potential for short-term losses, empowering a more active approach to the art of being a financial advisor.

Our sequence of returns research suggests that the shortfall optimization approach, compared to that of a common glide path, can reduce the probability of ruin (i.e., running out of money) by 50%. When measured in annual return units, the alpha implied by this reduction in the probability of ruin is approximately 100 – 150 bps. Investing for Retirement III: Understanding and Dealing with Sequence Rise

Sequence of return risk is entirely ignored in much of academic finance. But it is a significant risk for the vast majority of investment portfolios, and there are helpful tools that can mitigate its effects.

We believe a portfolio construction framework that considers the portfolio's lifespan and expected cashflows can account for sequence of return risk better than any standard single-period optimization. And by dynamically reallocating portfolios, portfolio managers can substantially further improve client outcomes.

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Traditional Monte Carlo modeling of stocks and bonds relies on outdated and inaccurate assumptions. Most Monte Carlo tools do not incorporate the mean reversion of assets over time and incorrectly model volatility profiles using a Random Walk assumption. 

Nebo corrects for both of those significant flaws. Not correcting these errors leads to overestimating long-term stock volatility and underestimating long-term bond volatility. This distorts the financial plan analysis and can lead to bond-heavy and stock-light portfolios, further jeopardizing the client’s ability to achieve her goals.

Investing for Retirement II: Modeling Your Assets

At its core, Nebo is a portfolio construction engine. However, Nebo is engineered to do a whole lot more.

Nebo:

1. Builds better portfolios for each client by aligning the portfolio with the plan.
2. It improves client satisfaction because you and your client maintain focus on the key objective and communicate in simple, easy-to-understand terms.
3. Increases your profitability by closing business faster and increasing your ‘share of wallet’ because of Nebo’s complete approach.
4. It helps grow your business by adopting a next-generation asset management platform that differentiates you from your competition.
5. Improves operational efficiency allowing you to eliminate spreadsheets and remove costs.
6. Manages regulatory risk by documenting the relationship between the plan and the portfolio.

Advisors are telling us that Nebo is changing the nature of client conversations. The focus becomes much more on the goals and the plan and much less on discussing the vagaries of the market over the last quarter. It is easier for the advisor to articulate the tradeoffs between long-term wealth accumulation and the potential for short-term losses, empowering a more active approach to some of the subjective aspects of the planning process. Clients become ‘invested’ in the plan, and both the advisor and the client benefit from being on the same page.

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Advisors struggle to connect financial planning with asset management, lacking confidence that they have their client’s assets in the right portfolios.

Nebo solves this problem by operationalizing a Goals-Based portfolio construction platform based on a key insight about risk. This approach inspires confidence in both the advisor and the client:

• Risk is correctly defined
• Client portfolios align with the financial plan
• The investment process is robust
• The framework is based on rigorous research, including mean reversion and next generation Monte Carlo simulations

This increased confidence easily translates into communication with clients and prospects, increasing client retention and sales.

_{The above endorsement is from a registered investment adviser (“RIA”) that is not a current advisory client of or investor in any private fund sponsored by GMO, but is a contracted user of the NEBO platform and uses the platform to make allocation decisions for its underlying clients. Although the RIA may from time to time allocate client capital to GMO-managed funds, the RIA has not been compensated directly or indirectly by GMO to provide the statements made herein. The RIA’s experience may not be representative of clients’ or other users’ experiences with GMO or Nebo, which may differ.}

The key concept within Nebo is to redefine risk, not as volatility but as not having what you need when you need it.

Nebo employs a proprietary, multi-period shortfall optimization that generates personalized portfolios that minimize this critical risk. By understanding each client’s needs, wants, and circumstances, Nebo creates portfolios personalized for economic reasons, not marketing.

No. We map your investment schema into Nebo, preserving your investment philosophy and persona. Nebo is open architecture and custom maps your investment schema - mutual funds, ETFs, single stocks, bonds, etc. into Asset Class Building Blocks.

Restructuring investment schema into these building blocks offers two benefits:

1. A deeper understanding of the portfolio structure makes it easier to ask the critical question: “what do I need to believe to own this portfolio for my client?”. 
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2. Nebo facilitates asking and answering this question interactively and iteratively, leading to better portfolios that align with the client’s needs and circumstances with current market conditions.
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3. The single asset class building block structure is important from an optimization perspective. Optimizers are not good at distinguishing between similar assets, e.g., choosing between different types of stocks in the presence of dis-similar assets.* 
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4. Small changes in assumptions regarding expected return, volatility, or correlation can lead to dramatic portfolio changes. However, among assets with differing characteristics, e.g., stocks and bonds, optimizers are extremely helpful in providing a systematic allocation based on the relevant characteristics. Segregating similar assets into these single asset class building blocks allows the optimizer to distinguish amongst them, facilitating their use in the multi-period Nebo optimization at the asset class level. 
   

*Optimizers are perfectly good at distinguishing between different kinds of stocks within an all-equity portfolio or different types of bonds within an all-bond portfolio. But portfolios with many different kinds of stocks and many different kinds of bonds are not well-suited for optimization. To use a color analogy, optimizers are good at (i) distinguishing between reds, blues, and greens in the absence of different shades of each or (ii) distinguishing between different shades of red in the absence of other colors.

It starts with four base asset classes – Stocks, Bonds, Cash, and Liquid Alternatives – and then anything that doesn’t fit neatly into one of those categories is categorized as a Custom Alt. Examples of Custom Alts include Global Credit, Real Assets, Private Equity, Private Credit, Commodities, Annuities, etc. 

This framework allows Nebo to map your investment schema into a framework that Nebo’s shortfall optimizer then uses to determine the allocation weights that minimize the risk that the investor does not have what they need or want when they need or want it. We have not seen an investment schema that we have not been able to map into Nebo’s highly-adaptable framework.

Nebo’s dynamic single asset class building blocks – e.g., equity allocation, global credit, and real assets – dynamically allocate to various factors, with weights updated daily. These building blocks, which can be customized for each advisory firm, generate dynamic allocations representing active regional and factor allocations and remove the arbitrariness of equal or other weightings. Our extensive experience, combined with our back-tests, suggests that these dynamic allocation decisions should result in excess returns in the range of 50 – 100 bps over a full-market cycle.

James Montier is a behavioral finance expert and a key consulting advisor on the Nebo team. 

Nebo is designed to mitigate primary behavioral biases. 

Examples include:

1. Framing - how you pose a question generally determines your answer. Nebo asks the right question: what do you need or want, and when do you need or want it?
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2. Recency bias - people tend to favor recent events. Nebo illustrates tradeoffs between long-term wealth accumulation and short-term losses.
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3. Loss aversion - people feel more pain from a loss than pleasure from gain. Nebo's essential utility function is rooted in Prospect Theory, and Nebo portfolios minimize Shortfall Risk relative to goals.

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