Asset-liability management and goal-based investing for retail business

The industry of online personal financial services is expected over the next years to absorb an increasing share of households and individuals’ savings and investment decisions with a parallel expansion of tailored decision tools and underlying methodological developments. In this article we present a dynamic stochastic optimisation model formulated to tackle a long-term optimal wealth management problem-based explicitly on the introduction of consumption and investment goals with a terminal inflation-adjusted retirement target. By embedding a goal-based investing philosophy in a dynamic framework we provide a reference modelling approach for increasingly popular households asset-liability management services. In a discrete setting we show that a dynamic stochastic programming formulation will lead to a highly realistic representation and solution of an otherwise hardly manageable optimisation problem and it is consistent with computer-aided decision support tools’ operational requirements.