Consider the client

'The profession’s stakeholders – clients, policymakers, the regulator and others – value the work that the profession does in providing access to investment opportunities'

The investment profession has a wide range of direct clients and an even broader range of ultimate beneficiaries. In the institutional world, investment professionals work for pension schemes, insurance companies, charities, endowments and foundations. While a pension scheme, represented by its trustees, may be the direct client, the work the profession performs will impact that scheme’s own members and affect their financial outcomes.

The profession’s work also has a broader impact. Where pension schemes’ investment returns are improved, the need for corporate contributions is reduced, freeing up capital for investment elsewhere. Further, by helping private companies meet their pension obligations, the investment profession reduces the ultimate reliance on tax-funded public entities. Similarly, the profession can positively affect a charity’s ability to fund its activities or an insurance company’s ability to pay claims and maintain premia at a relatively low level.
As well as the work the profession performs on behalf of institutional clients, it also works for retail clients. Individuals may run their own portfolios or might use independent financial advisers, wealth managers or private bankers to help them construct and manage a portfolio. Either way, those portfolios will often be invested in collective vehicles such as funds or investment trusts. The profession’s stakeholders – clients, policymakers, the regulator and others – value the work that the profession does in providing access to investment opportunities and working to deliver returns consistent with the mandates that we are given. They believe that the profession’s work begins with helping potential clients consider whether it is appropriate for them to invest and, if so, by providing them with support and guidance on how to assess their investment needs.

If it is appropriate for an individual or institution to invest, the professional’s task is to help them understand what they are trying to achieve (which typically requires them to consider their future liabilities and their investment time horizons). These are not simple assessments to make, but they are
critically important. Without a clear understanding of a client’s position – assets and liabilities, income and costs, dependents and dependencies – it is not possible to determine how best the investment
profession can serve the client.

The development of an investment policy statement that identifies these issues alongside other items
such as the client’s time horizon, tolerance for risk, constraints and tax requirements – is a fundamental
first step in delivering a successful outcome (and is a core component of the CFA Program syllabus). It is unlikely that a client would be able to complete this exercise successfully alone.

Once the client’s needs are known it is possible to consider how best these might be met. An investment
professional will propose an appropriate balance of assets most likely to deliver the risk-adjusted returns the client seeks over time. Once agreed, the portfolio will then be constructed through the selection of the appropriate securities or investment vehicles.

Read more in our report.