By Mark Barnicutt on April 1, 2011
It’s An Investment Product World:
Investors are so used to hearing investment professionals talk about the merits of their favourite investment opportunities whether it be gold, oil & gas, real estate, bonds, bank stocks, technology stocks….whatever the short-term ‘generic investment flavour’ happens to be at that point in time. The problem with this approach is two-fold:
- First, it’s a “one-sided” statement that only looks to the “return potential” of a given investment and typically does not speak to “risk — also known as downside — potential”.
- Second, it’s a generic statement that doesn’t consider the investment goals and/or risk tolerances of various range of investors.
What Is True Investment Counselling?
In contrast to generic investment advice, true investment counselling is a highly professional & personalized experience that is about helping clients diligently pursue their unique investment objectives with a deep respect for their tolerances for various forms of investment risk. In fact, the ongoing trade-off between clients’ “expectations for return & their true tolerance for risk” is the primary challenge facing any quality investment professional.
Over the course of an investment relationship with clients, ‘risk and return’ are two “opposing levers” that a good investment counsellor is always adjusting in helping clients diligently pursue their various investment goals.
The Architect vs The Engineer:
The analogy that I often provide to clients is that it’s like buying a customized home. Specifically, there are a wide variety of house sizes, ammenities and styles. The successful architect is one who designs the “right fit home” for each of his/her clients as it’s such a unique experience. In contrast, though, the various “engineers” that help “build the house”, according to the specifications of the architect, are people such as carpenters, plumbers & electricians.
Both the ‘architect’ and the ‘engineers’ are important roles — they must both work together to create the desired result – but the client needs to start with the design (ie: the ‘architecture’) before they can ‘implement’ the design, through the various ‘engineers’.
Although this approach is generally common sense for the building of a customized home, the opposite seems to occur in the investment business. In other words, in our view, far too many clients are buying a collection of engineered investment products without a prudently designed investment architecture plan that truly meets their unique investment objectives and respects their tolerance for investment risk. As a result, it’s no surprise, that their “investment house” is far too often an unstable structure as it’s been built upon the wrong foundation!
HighView Financial Group – The Portfolio Architect:
It’s for this reason that at HighView Financial Group, we often describe ourselves to clients as “architects” of portfolios. In the asset management industry, the professional role of the “portfolio architect” is to spend the time to truly understand each client’s unique investment objectives, risk tolerances and preferences, and then source, research/due diligence & combine the precise combination of high quality, engineered investment products, in order to design a tailored investment portfolio for each client.
Anything less creates investment accounts that are a “collection of ideas” and the risk that client investment objectives will not be attained and client’s risk tolerances will be violated……outcomes that are never a recipe for helping investor clients create sustainble wealth.
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