What clients should expect from their investment manager
Twelve months after the opening of Smith & Williamson’s Birmingham Office, Mark Willis, head of office, considers exactly what a client should expect from their investment manager.
In a world which has become increasingly product-driven, the financial turmoil of the last two years has clearly demonstrated that the prime requirement of an investment manager is to provide a tailored service to meet an individual client’s needs. This approach is more likely to be successful than a range of products with a “one-fix-fits-all-approach”, which may or may not be appropriate.
A good investment manager should take time to understand a client’s requirements (with input from the client’s other financial advisors where appropriate) in terms of not only income and capital growth, but crucially how this fits in with the client’s overall financial circumstances and, of course, risk appetite. Whilst there are useful models, which can be used to guide clients towards an investment style or service, the best approach must be to regard each client individually. Clients rarely fall into neat categories, and even if this appears to be the case initially, circumstances invariably change over time so it is imperative to be flexible. The investment manager must seek to provide an ongoing service and dialogue. He must put himself into the client’s shoes and very carefully consider matters from that perspective.
To achieve this, two related objectives are important:
- Look to establish a strong and close relationship with the client. An investment manager should want to understand not only your attitude to risk and reward, but what your future requirements might be. Your investment strategy may well meet your needs today, but what about pension provision, health care in old age, and future family commitments? Your manager should take these issues into consideration in advising on current investment matters. Your circumstances can and probably will change and you need to have the confidence to discuss this with your advisor so that the investment approach can be adjusted as necessary.
- Make sure that the communication channels are open. A good investment manager should encourage meetings and give you regular reports on how your investments are performing. A report is not just a copy of the latest valuations, but it should detail how your portfolio has performed against an appropriate benchmark so that you can judge of the investment manager’s skill. He or she also needs to demonstrate that you have settled on the right strategy going forward. Meetings are important as they give the opportunity for the investment manger to discuss any changing circumstances, either from an investment perspective or in your personal requirements.
Having established these important first requirements of a good investment manager, a client needs to consider the support available from the investment manager’s firm. He or she may have the right approach, but do they have the resources to give you the best results? In this context, size really does matter.
Critically, individual investment managers vary in personality, experience and specialisation. For example, a Charity or Trust Fund will have very different requirements from a more conventional personal portfolio. Self Invested Personal Pensions and other pension vehicles will require a huge variation in investment strategies, dependent on where in the pension “life-cycle” each client is. So a firm offering dedicated experienced teams will provide a more comprehensive understanding of associated issues.
We live in an increasingly complex world. There is a huge array of investment opportunities. Gone are the days when you might have bought a few BP shares to complement your two holdings in government securities. Today, the world’s stock markets are open to all, from the USA to China, with many markets in between. If you then consider alternative assets such as hedge funds, commodities, and property, the options and the best way to combine them, multiply.
Your investment manager needs to demonstrate that he/she has sufficient resources to advise and manage the appropriate assets and strategy to meet your needs (which of course may be frequently changing, hence the need for the close relationship referred to above). The key here is that your investment manager needs to be part of a firm large enough to tap into global research resources, as well as giving access to good advice from a complementary range of high quality professionals, but not so large that you become lost in a product driven arena.
Ultimately, it is not for an investment manager (or firm for that matter) to simply dictate what investments or products you should have through a “box-ticking” exercise. Once you have explained what is required it is down to the skill and experience of an investment manager to provide a tailored solution to achieve your aims.
In conclusion, ask yourself whether your investment manager understands your requirements, and is prepared to assess these regularly in order to meet your needs. If so, does he or she have the back-up resources in an increasingly complex world to provide you with consistent high quality investment advice? Advising on stock markets, strategies and individual securities, is rarely a straight and easy path and can take years of experience. However, having the right guide, in whom you have confidence and trust, will lead to a long and happy relationship, ultimately ensuring you achieve what you want to achieve.
For further information contact:
Mark Willis, investment director and head of the Birmingham office of Smith & Williamson, the accounting and investment management group on
0121 710 5212
mark.willis@smith.williamson.co.uk
Disclaimer
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
Note to editors
Smith & Williamson is an independent professional and financial services group employing over 1,500 people. The group is a leading provider of investment management, financial advisory and accountancy services to private clients, professional practices and mid-to-large corporates. The group operates from offices in London, Belfast, Birmingham, Bristol, Dublin, Glasgow, Guildford, Maidstone, Salisbury, Southampton and Worcester.
Smith & Williamson Investment Management is part of the Smith & Williamson group.
Smith & Williamson Investment Management Limited
Authorised and regulated by the Financial Services Authority
Smith & Williamson Investment Management,
a trading name of NCL Investments Limited (member of the London Stock Exchange) and Smith & Williamson Investment Management Limited. Both companies are authorised and regulated by the Financial Services Authority.
NCL Investments Limited
A member of the London Stock Exchange
Authorised and regulated by the Financial Services Authority
Smith & Williamson Fund Administration Limited
Authorised and regulated by the Financial Services Authority
