This article was originally published May 2016
I am a salesperson and I sell ideas. These ideas are based on a fairly long career helping people manage their money and financial situation.
While I am sure it has been happening for a while, I have recently found myself saying the same things over and over again to clients and prospective clients. I have also found myself questioning some of the things I say.
Why do I say that? Is it true? Do I really believe it matters?
I say these things because I feel they are the key elements of the advice I give, and I believe they are true because I have enough evidence/experience to support this. And I know they matter as in many cases they are based on clients questions or views that have been expressed to me.
So here are some of the things you might catch me saying…
- I have been doing this for a long time. I have been working with my specific type of clients for around 15 years, so I know what works in helping them achieve their goals. Conversely, there are areas of advice, and clients, I am not experienced with. I cannot help everyone and do not want to give someone inappropriate advice just to get a fee.
- By choice, I do not have a lot of clients. I am a small business where every clients is a real client — I have a deep understanding of their situation and want to be involved in all parts of their planning.
- I am no better or worse at predicting the future than anyone else — and investing is all about predicting the future. Fund managers are the same. They make mistakes, but hopefully they get more decisions right than wrong.
- I personally invest in the same products that I recommend to my clients. I am a client of my own, but I also seek counsel from others to help me where I need specialist advice e.g. some insurances, my estate planning, doing my tax.
- I am not a big fan of index investing, so I prefer investments that do not focus on matching their portfolios to what the index is made up of. I want a manager to be relatively free to hold investments in their portfolio purely on merit, rather than having to hold an investment because it is “in the index”. Saying to a client “you lost 5% but that is okay because the index is down 6%” does not sit well with me. Of course there will be some correlation between a share portfolio and the broader market (index), but a portfolio holding investments in different weightings to the index will have a different outcome.
- Whenever possible, I use managed funds where I can meet the manager. Equally important, I prefer the manager to own the funds management business and have their personal wealth invested alongside investors. While this is no guarantee of better performance, having “skin in the games” should make them keener to achieve.
- I am biased. I have investments I prefer over others and this can be based on quantitative (performance, volatility, asset allocation) and qualitative (the history of the manager, how accessibility they are to speak to, do I trust them to do what they say they will do) reasons.
- Clients can meet or speak with me as much as they need. My retainer fee is fixed on an annual basis and covers everything – investment and strategy advice, and all associated administration.
- When meeting prospective clients, I always stress there is no cost to meet and see if we can work together i.e. they need advice that I can provide. And this can take as many meetings as needed. I will not ask for a fee to prepare a formal financial plan until we have pretty much agreed on the big picture.
- I get paid the same no matter what advice I give. I do not get paid more or less for different investments or strategies recommended. My retainer fee is set on an annual basis, and clients sign-off on this for me to be paid.
- Clients can leave me anytime. I can be fired as a client’s adviser. As a result, no investments I have recommended need to be sold, unless the client chooses to. If that choice is made, all investments can be sold because they are all liquid.
To summarise this even further, I hope to think my clients experience an advice process that is uncomplicated, transparent and and clearly biased towards their interests and objectives.
This article is the opinion of the writer and does not consider the circumstances of any individual. This document has been prepared by Peter Keogh (Authorised Representative No. 253538 of Paragem Pty Ltd AFSL 297276) and is intended to be a general overview of the subject matter. The document is not intended to be comprehensive and should not be relied upon as such. We have not taken into account the individual objectives or circumstances of any person. Legal, financial and other professional advice should be sought prior to applying the information contained in this document. No responsibility is accepted by Peter Keogh, Paragem or its officers.