Why We’re Different

Many people’s impression of financial advice is of being sold a collection of investment and insurance polices that appear to have little relevance to the lives they actually lead. Whilst all financial advisers are required to gain an understanding of their clients’ circumstances, some don’t pay sufficient attention to this area, preferring to sell them specific products to meet isolated needs – a school fees plan here, a personal pension there etc.

We believe that a more comprehensive approach, a professional financial planning service, will suit many doctors and dentists better as often a product is not the best solution.

This clarity of thinking is also reflected in the way we invest our clients’ assets. Since we don’t rely on the fund management industry to pay us we are free to recommend what, based on our exhaustive research, we feel is the most efficient way to help our clients build and protect their wealth.

Our service and advice is completely impartial and we will consider all options in an objective way before devising a planning strategy.

Our belief is that unless we completely understand the current and future circumstances of our clients we cannot provide them with a sustainable financial strategy. For this reason we invest a large proportion of the time we spend with clients in establishing this level of understanding.

This part of the process is similar to laying the foundations for a building. If it is not done properly then whatever is constructed on top stands a good chance of collapsing and then you have to start all over again, often making the whole exercise much more expensive.

The process of understanding you has three steps:

  • Helping you set your goals
  • Helping you define your attitude to risk
  • Helping you determine the amount of money you can commit to funding your goals

Your Goals

Few people take the time to consider the specific goals they wish to achieve during their lifetimes. Without considering your goals we cannot create a meaningful financial strategy for you.

Imagine going on a car journey where you have to get to a certain destination but no one will tell you where it is or give you a map of how to get there.

The goals that you set for yourself can be as dramatic (changing career, taking two years out to sail round the world, etc) or as restrained (giving a certain amount of your income to charity) as you want them to be. The goals themselves are not as important as the fact that you have gone through the process of assessing your hopes and ambitions to establish them.

Attitude to Risk

We use the risk profiling system patented by the Australian company Finametrica to determine the level of risk you are naturally happy to live with. The test uses a carefully constructed set of psychometric questions to produce a reliable aid that helps us understand your personal attitude to risk. We use this information to establish what type of investor you are, and broadly what levels of returns we might hope to achieve within your investment portfolio.

This information is important because it helps us to create an investment portfolio with which you will be comfortable. If the risk element of your portfolio is too great then at some point you will become uncomfortable and will want to pull out of the process. If this happens then we will have failed in our job to create a sustainable financial strategy for you. It is also important because it helps us to set your expectations in relation to the way in which your investment portfolio may perform in future years.

The value of your investment can go down as well as up and you may get back less than you have invested. 

Funding

You’ll be aware of your current income and, as a result of the goal setting exercise, your expected levels of income in the coming years. As part of the financial planning process we will ask you to complete a detailed expenditure questionnaire, which covers all the major aspects of your day to day life.

It is vital that the information you give us is as accurate and complete as possible.

The results of the questionnaire are used for two purposes:

  • To determine the amount of money you have available to fund your goals
  • To determine how much income you will need in retirement / in the event of long term incapacity in the event of the death of a partner.

Once we have established your attitude to risk, goals and funding situation we start another conversation with you about how these three elements interact. It is rare that we meet a client whose funding situation exactly matches his/her financial goals. It is usually the case that the client needs to modify his/her goals or the amount of money he/she can make available to fund them. This discussion continues until the three elements – attitude to risk, goals and funding – are all aligned and you are comfortable with the overall result.

Up until this point much of the work has been preparatory, with our role being to coax the relevant information out of you. However, now that the solid foundations have been built you can take a step back while we get on with the next phase.

Asset Allocation

Using all the information we have gathered from you, we now construct an investment portfolio that is unique to your situation. Our process for constructing portfolios has developed through years of experience and research.

Some time ago we stopped trying to sift our way through the marketing spin of the fund management industry, and started to align ourselves with the Nobel Prize winning research of the international academic community – a group with no interest in the promotion of any particular investment style, and for whom facts are more important than sales figures. The portfolio that we construct for you is built on the widely accepted principles established by this research.

If you are interested in the detail of how we construct an investment portfolio and why we invest in asset class funds rather than actively managed funds, then you should read one of the many documents written about whether the fund management industry delivers performance above stock market returns.  If this sounds as exciting as paint drying, then the key points to be aware of are:

  • We split the investment of your money across four asset classes:  cash, bonds, property and equities
  • The proportion of money that we invest in each class is determined by the results of the conversations we had during the “understanding you” stage of the process and by how much risk you actually need to take
  • If we invest your money in bonds or equities, then we only invest it in “asset class” funds – avoiding the risk of a fund manager not delivering performance in excess of the market he’s trying to beat

The investment portfolio we construct is designed to maximise the probability that, over the long term, it will achieve the market returns of the asset classes in which it is invested.

Tax planning

As part of our overall tax planning service we aim maximise the tax efficiency of the portfolio by sheltering your assets in the most appropriate tax wrappers available to you. Whilst it is important to minimise any taxation of the portfolio, we are careful to ensure that this is not done at the expense of investment returns.

Monitoring and re-balancing

The unique combination of your personal goals and attitude to risk forms your financial strategy. The portfolio that we construct for you is a direct product of these factors. If the composition of the portfolio changes then it ceases to be aligned with your financial strategy. Similarly, if any of your personal goals or your attitude to risk changes, then the portfolio will cease to be appropriate.

Any misalignment between your portfolio and your financial strategy means that the portfolio is no longer relevant to you, and could seriously jeopardise the likelihood of you achieving your goals.

If you wander a couple of degrees off course during a long journey, then you may end up miles from your intended destination.

Because your portfolio is made up of different assets, it is inevitable that some of them will perform better than others in any given year. Therefore, at the end of each year we need to review the performance of the assets in your portfolio and “re-balance” them to restore the original composition of the portfolio. This may involve selling part of an asset that has performed well and re-investing the proceeds in one that has not performed so well.

The discipline of re-balancing raises another important aspect of the ongoing monitoring of your portfolio – keeping you on the straight and narrow. If you are to achieve your financial goals then it is essential that you stick with the strategy we devise together.

There is a real temptation to sell a particular asset after a period of poor performance, however in doing so you increase the risk of continually buying assets at or near the peak of their value and selling them at or near the bottom – the “buy high, sell low” approach. In addition to this risk, regularly buying and selling assets to chase short-term gains will incur additional transaction fees that drag down the overall performance of your investments.

By encouraging you to hold a distributed spread of assets through the peaks and troughs of their investment performance we maximise the probability that, over the long term, your portfolio achieves the market returns of the asset classes in which it is invested, and thus maximise the probability that you achieve your financial goals.

Now that you know more about why we’re different, click here to learn more about our approach