For many, it’s tempting to judge their financial advisers on the recent performance of their investment portfolio. Indeed, for those advisers whose business models are based on the promise of outperforming the competition, such judgements are justified. However, for advisers such as ourselves, such comments fail to understand the value that a good adviser delivers both in terms of investments and the fact that no manager can control the returns that the market delivers.
Our aim as financial planners is to deliver a long-term strategy for our clients, which will involve a discussion about their ‘pre-race’ tactics to ensure they don’t get involved in a ‘fast start’. Instead, we advise a steady pace throughout, with the facility to change pace as the race develops. We’re happy to hold your hand along the way, rather than just at the beginning and the end.
Our role as your investment coach includes five key tasks which, when seen as one, provide significant value.
- Structure. The first and most critical step is getting the portfolio structure which is right for you. This must be based on your emotional and financial tolerance to take risks. This involves selecting sensible risks to take and then using high quality, low-cost funds, designed to capture the rewards that markets can deliver.
- Governance. You should make sure that your portfolio strategy and the funds that make this up continue to deliver the greatest chance of a successful outcome. An important element, but less obvious, part of this is our role in preventing you investing in fad or ‘too good to be true’ investment products.
- ‘Hand-holding.’ The hardest part of investing is having the confidence and emotional fortitude to stick with the programme through thick and thin. When markets are going up or down with great magnitude (as they inevitably do) our emotions tend to kick in. This will result in either greed or fear, often leading to the reduction of wealth through a ‘buy-high’ or ‘sell-low’ strategy. Our role is to coach you and prevent you from following the crowd or listening to the media noise, which so often leads to wealth destroying actions.
- Rebalancing. Over a period of time, your portfolio structures drift due to market movements. This can results in either too much risk because the equities in your portfolio have increased, or too little risk because the equities in your have reduced in value. By rebalancing you can ensure that the risk level of the portfolio remains where it is specifically designed to be. While at times rebalancing can feel counter-intuitive, it’s our role to recommend you rebalance when it is right to do so, free from emotion.
- The other stuff. Our job is to take care of the menial, boring – yet highly valuable – administrative functions. This includes ensuring your ISA and pension contributions are used and that capital gains are taken in a controlled manner, avoiding as little time out of the market as possible. We all hate paperwork so we aim to take care of it for you.
Carpenter Rees is there for you to provide perspective, and help you keep the faith in the investment strategy.