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Why?

What?

How?

What Classifications Impact

Classification Levels Explained

Creating and Assigning Classifications
 

 

Why is Product Classification Important?

• Product classification is how you label your products and helps you group products in ways that make sense to you and your clients. 
  
  
• These classifications touch nearly every part of the Orion platform, including Trading, Reporting, Performance, and more! 

 

What is Product Classification?

Orion supports three levels of classification: Asset Category, Asset Class, and Risk Category (each is explained in detail below under Classification Levels Explained). Two of these, Asset Category and Asset Class, are mandatory and work in tandem with one another. The third, Risk Category, is optional and independent from the other two.

How your firm leverages product classification is entirely up to you, but there are some fairly common practices. Most firms keep Asset Categories very broad, often using security types (Equity, Bond, etc.) at this level.

 

Many firms will then use Asset Class to narrow the products into segments (Large Cap Value, International, Muni vs. Corporate, etc.)

 

Risk Category is a bit more of a wildcard. If you used broader Asset Classes (maybe you only want Large Cap recorded at the Asset Class level), you could use Risk Category to break out Value vs. Growth. Alternatively, you might want to use Risk Category to identify Sectors (Technology, Healthcare, etc.)

 

The possibilities are endless and within your control. It is most important to think through the downstream impacts of your setup first to ensure your setup is going to work for all of your Orion needs.

 
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How do Product Classifications Work in Orion?

What Classifications Impact

In Orion, the classifications that are assigned impact a wide variety of places. Refer to each section below to review how classifications affect each particular area. 

Reports

The number one thing that classifications impact is reports. These are used to create pie charts and graphs to display allocations of investment types. Other apps, such as Orion Planning, also use these in a similar manner when displaying graphs and charts. Classifications can also be used to group similar assets together when listing out the individual assets of an account or household.  

Models & Rebalancing

Models and rebalancing commonly use product classifications. Setting up models to look towards specific classifications ensures that clients aren't over-leveraged or exposed to a certain type of investment, and rebalancing is used to bring the client back in line with the model(s). For more information on how to leverage this functionality, please contact the Trading team.

Queries

The Queries app also has access to this data. Several queries are readily available for firms to export different data based on classifications. Some of the more common queries reflect each classification's AUM and percent allocation. You can run most of these queries at either the household or account level or across several households or accounts at the same time. If you're unable to find a query that meets your needs, use the Query Builder to create new queries, or any SME team can assist in creating a custom query based on your specification. For more information, please review Creating Your Own Queries with Query Builder and How to Request a Custom Query (or changes to an existing Query).

Billing

When billing management fees, you have the ability to assign an Asset Level Fee Schedule to an account. This allows the account to be billed at different rates based on the types of holdings it has, and the fee structure used is based on the types of classifications assigned to each holding. For more information, please review How to Setup Asset Level Billing & How it will Affect the Bill, or contact the Billing team for assistance. 

Performance

You can also run performance based on each classification. To fully utilize this functionality, all products that have ever been owned must be classified appropriately. For more information about this functionality, please contact the Performance team.
 

Classification Levels Explained

In Orion, an asset's classification structure is set up like this from most granular to least granular: Asset> Product> Asset Class> Asset Category> Parent Category. For example, your client has a position (asset) in ABC Stock Holding Company (Product). You designate ABC Stock Holding Company as a Small Cap Stock (Asset Class), which is in U.S. Stocks (Asset Category), based on the "Equity" template (Parent Category). For the most part, parent categories are not client-facing and cannot be created or deleted.

 

Asset Category

Typically, Asset Category is the least granular of all three levels. By default, Orion provides all firms with three Asset Categories: Bond, Equity, and Money Market. These names and classifications are not set in stone, and they can be edited, added to, or removed if needed. It is best practice not to change the abbreviation for these if your firm uses auto-assignment because it will not work properly. One important note: Asset Category is never directly assigned to a product. Asset Classes (below) are directly tied to an Asset Category. When a product is assigned an Asset Class, the corresponding Asset Category is assigned by default.

 

Asset Class

Asset Classes are the second level of classifications. These are typically used to get more granular compared to the Asset Categories. Orion provides all firms with one starting Asset Class, Security. All products that are not assigned to an Asset Class are automatically assigned to the Security Asset Class. This Asset Class is very important because it's used to populate the Missing Asset Classes section of the Products and Prices app. Use the Missing Asset Classes section to easily find products that need to be classified. Outside of the Security Asset Class, all other Asset Classes are up to you. Some examples of frequently used Asset Classes are Small/Mid/Large Core/Growth/Value, sector classifications, or bond-specific classifications.     

Below is a diagram that illustrates the relationship between Asset Classes and Asset Categories when assigning an Asset Class to a product.

As different Asset Classes are assigned to products, the respective Asset Category is assigned to the product simultaneously. For example, when assigning Large Cap or Small Cap to their respective products, the Asset Category of Equity is assigned to the product at the same time. Similarly, with High Yield and Short Term, as these are assigned to products, the Bond Asset Category is assigned. Each Asset Class is only associated with one Asset Category. If you have Asset Categories of US Equity and International Equity, the Asset Class of Small Cap will not assign US Equity to some products and International Equity to others. To accomplish this, two Asset Classes would need to be created. For example, Small Cap - Intl and Small Cap - US.

 

Risk Category

Don't let the name of this level fool you. This classification level does not directly have anything to do with analyzing the risk of an investment. It is easier to think of it as an alternative Asset Class. This level of classification has the same functionality as an Asset Class when it comes to the areas of Orion that it impacts. Yet, it differs from Asset Classes in that it is not connected to any other level of classification. Risk Categories are a stand-alone level of classification. Orion provides just one default Risk Category, Uncategorized. All other classifications at this level are up to you. The Uncategorized Risk Category works the same as the Security Asset Class. Any product that has not been assigned a Risk Category is assigned to this classification and you can easily find these in the Missing Risk Category section of the Products and Prices app. Assigning Risk Categories to products is optional, and if you are happy with utilizing just the Asset Categories and Classes, nothing needs to be done here.  
 

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Creating and Assigning Classifications

Generally speaking, the creation of Asset Categories, Asset Classes, and Risk Categories is a manual process that must be done one at a time. However, some Asset Class and Risk Categories creation and assignments can be automated based on Morningstar classifications. If this is something that your firm is interested in, please reach out to the Products and Prices team to discuss this functionality. There is no cost for automatic Morningstar classifications; we only require that you sign an addendum. 

Please review the How-To and Overview: Create and Assign Asset Classes, Asset Categories, and Risk Categories article for specific step-by-step instructions on creating and assigning these classifications. 

 

Changing the Asset Category Associated with an Asset Class

Follow these steps to change the asset category that an asset class is tied to:
 

• Click Asset Classes/ Categories.
• Click the name of the Asset Class you will update.
• In the Asset Category dropdown menu on the right, select the Asset Category you need.
• Click the Save button.

 

Please Note:

• As a general rule, it is fine to change the name of an Asset Category name based on how you would like to appear on reports. However, the abbreviation should be left as is for the purposes of behind-the-scenes processes.
• Keeping the name and the abbreviation the same is useful when creating an Asset Category. 
• Every Asset Category must have a parent category. For the most part, these are unseen and should be thought of as a template governing the properties of the asset classes and categories associated with them. As a rule, just pick the one that most closely resembles the category you are creating.
• Sort Order and Color are not required fields and impact how these categories appear in reports. You are able to update or assign these at any time. 

 

Asset Classes and Categories Overview -  Video (3 min.)

Watch this video to learn how to create and assign asset classes and asset categories. 
  

Risk Categories Overview -  Video (2 min.)

Watch this video to learn how to create and assign risk categories.