Care and consideration

'Helping clients to understand market movements and helping them to identify and manage their own behavioural responses to those movements is another way the investment profession delivers value.'


Security selection – or manager selection – is a difficult process and one that stakeholders believe is likely to be better undertaken by an investment professional than by a client on their own due to the professional’s specialist skill set and knowledge, ability to dedicate time to the role and access to in-depth information. In addition, the investment professional is able to spread the cost of that activity across multiple clients. Making pooled, or collective, vehicles available widens the range of potential investments for clients.

Such vehicles enable investors to access markets that might otherwise be unavailable to them. The costs are shared and they can benefit from the diversification that can be built into those vehicles, which can lower risk. It is also noteworthy that most funds offer investors daily liquidity allowing them to move into and out of the investment with relative ease. Once the portfolio is formed, the investment professional will monitor these holdings – buying and selling securities in order to meet objectives outlined in the investment policy – and will provide regular reports to the client about the performance of the portfolio, the costs incurred in managing the portfolio and about the markets in which the investments have been made.

Helping clients to understand market movements and helping them to identify and manage their own behavioural responses to those movements is another way the investment profession delivers value. Without education and advice, there is a greater risk that people might ‘buy high and sell low’. Investment professionals – who have specialist knowledge of different markets and conditions and are more aware of the difficulties and costs involved in timing markets – can help clients to avoid making bad decisions that will damage long-term performance.

In a perfect world, investment professionals would always deliver the outcome that the client seeks. While an investment professional should propose and follow strategies intended to deliver the client’s objectives (according to their constraints and requirements), those strategies will also be based on the investment professional’s best assessment of the client’s future requirements and the future development of markets. The passage of time is likely to prove both assessments somewhat inaccurate, but, if a client’s potential needs have been researched with sufficient care and the portfolio has been constructed so that it has sufficient flexibility to perform reasonably well in different market conditions, then the client’s outcome should tend towards their expectations.

Read more in our report.

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