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Are two investment heads better than one?

Most clients will expect to see their advisers demonstrably managing their investment strategy but in today’s brutal markets making the right decision can be difficult, argues James Goward, head of Sales Support, Rathbones

So far, 2016 has been a difficult year for investors, arguably more so for would-be investors. Returns have actually been pretty good, on the whole. But market volatility at the start of the year and investor apathy in the run up to the Brexit vote, meant that new business numbers for the first-half were nothing to write home about.

Given the vote to Brexit, it is perhaps surprising to see that markets have bounced back in the past two months and economic data are encouraging. We will have to wait and see how the back-end of 2016 pans out.

Regardless of market caprice, in my experience, general practitioner advisers have always been resourceful in how they advise clients and where they generate new business. Indeed, business statistics sent to me by a network partner indicate big dips in investment business following the Brexit vote. However, this was more than compensated by huge surges in the writing of new protection and mortgage business. The ability to reinvent oneself and follow the money has long been the insurance policy for many an advisory firm.

As has been proved many times with hindsight, market timing is a foolhardy pursuit for most, and sitting on one’s hands until everything in the garden is rosy isn’t normally a route to long-term success either. It’s at times like this that the adviser’s role as counsel to their clients has to come to the fore.

This advice might include doing nothing. However, clients paying a regular fee to their adviser might have an expectation that some kind of active investment activity should be part of their wealth plan. The challenge as a financial adviser is where to go next? Today’s markets can be brutal, choosing currencies can be the difference between strong profits and significant losses. Most advisers don’t have the time to give these decisions the rigorous interrogation they deserve. Some advisers could see recent events as an opportunity to outsource and employ solutions for their clients that enable them to park the agony of choice for underlying investment decisions with dedicated discretionary practitioners.

In current times, two heads might be better than one.

Working alongside a DFM that has conviction, an active asset allocation strategy and the necessary research resources to make informed investment decisions not only removes the agony of choice, but enables clients’ wealth to be more actively managed. This can also include agreeing a strategy for how new cash might be staged into the market.

So when it comes to finding the perfect time to invest, a Chinese proverb probably sums it up best: “Man who waits for roast duck to fly into his mouth must wait a very, very long time…”

 

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