By Mark Barnicutt on April 10, 2011
Investment Stewards & Their Challenges:
At HighView Financial Group, we recognize that there are many people that have a fiduciary obligation for the oversight of wealth that has been entrusted to them for the benefit of others — advisory firms, family offices, foundations, endowments, private pension plans and asset managers to name but a few. We refer to the individuals who are responsible for the fiduciary oversight of such wealth as “Stewards”.
With the globalization of capital markets over the last few decades, there has been a marked increase in the range and complexity of investment opportunities available to investors. In fact, the array of investment options available today is virtually limitless: stocks, bonds, mutual funds, pool funds, hedge products, structured products, private equity, income trusts and commodities.
To simplify the delivery of this vast array of investment solutions to investors, many Stewards have increasingly shifted their clients’ portfolios towards managed asset programs that contain a prudently structured set of discretionarily managed investments, typically on a multiple investment manager basis.
In spite of this secular shift to managed asset/multiple manager offerings, global investment opportunities have also created a whole new set of risks that investors have been forced to address. For this reason, Stewards are focused on fulfilling their fiduciary obligations which are often tied to the creation of sustainable wealth.
At HighView Financial Group, it is our belief that the primary objective of a Steward is:
“The diligent pursuit of the investment objectives for the wealth entrusted to them”.
Unfortunately, the global wealth management industry has a natural tendency to become excessively focused on the “security selection” and “investment manager selection” functions of our business and, as a result, often loses sight of the real purpose of their role.
Making The Wealth Sustainable:
An obligation of a Steward’s role is to create sustainable wealth in order to meet the ongoing obligation of the wealth entrusted to them. In our view, sustainability is tied to the integration of three functions:
Stewardship: Thinking & acting like a fiduciary
Investor Profiling: Identifying the purpose of the money against discrete time horizons
Asset Management: Constructing portfolios that meet investor needs, investment objectives & risk tolerances
For this reason, HighView focuses on working with our clients, and their various professional advisors, to make their wealth “sustainable“. As a result, the investment objectives that HighView deploys with our clients is one of:
Preservation of capital, and where growth is required, such growth will be pursued in a responsible and prudent manner.
A common misinterpretation of many clients and professional advisors, though, is the definitions of “Capital Preservation” and “Responsible Growth“. For this reason, we’ve provided an explanation of each term below:
I. Capital Preservation:
The definition of “Capital Preservation” does NOT mean that the value of the portfolio is static and never grows. As the future purchasing power of capital is important to investors, even in environments of low inflation, the real value of a client’s capital often needs to increase over time. As a result, except for the utmost conservative investors or investors who have such a large capital base that they are not concerned about future purchasing power, the inclusion of some assets in clients’ portfolios that protect the future purchasing power of their wealth is critical.
II. Responsible Growth:
When growth is required in a client’s portfolio that goes beyond mere purchasing power protection, HighView holds the view that such growth should be pursued in a responsible and prudent manner. With all investing, there are risks. The goal of a true investment counsellor, such as HighView, is to diligently pursue a client’s investment objectives but to do so in a manner in which the combination of risks assumed in a portfolio does NOT put the client’s capital at risk of material/total loss.
The analogy we alway provide to clients, when growth is required, is that we focus on “hitting a series of singles” rather than trying to “hit one ball out of the park”. In our experience, investment approaches that attempt to “hit the ball out of the park” often result in wealth destruction instead of the wealth growth. As a result, HighView does utilize growth strategies in clients’ portfolios when required, but it is done in a prudent and responsible manner that doesn’t incorporate “big bets” in client portfolios that jeopardizes the sustainability of client wealth.
In a global marketplace, where clients have seemingly unlimited investment choices that focus primarily on “returns” without due consideration to “risks”, HighView strongly believes that the approach of preserving the capital that has been accumulated and growing it in a responsible manner, if required, are sound investment principles for long-term capital accumulation. The following quote from Warren Buffet exemplifies this belief:
“ Ben Graham wasn’t about brilliant investments and he wasn’t about fads of fashion. He was about sound investing, and I think sound investing can make you very wealthy if you’re not in too big of a hurry. And it never makes you poor, which is even better.”
Warren Buffett, CEO, Berkshire Hathaway Inc.
- An Investment Fiduciary – The Integrity of Your Portfolio - January 24, 2024
- Future of Family Wealth Preservation: Virtual Family Offices - September 13, 2023
- 7 Reasons for Changing Your Investment Advisor - September 8, 2023
