It Should All Be About The Investor Client

By Mark Barnicutt on April 8, 2011

The Challenges Facing Investors:

At HighView Financial Group, we believe that investors are faced with ever-increasing complexities in the management of their assets. As a result, we are witnessing many investors on a mission to find a framework that will allow them to structure and manage their assets in a manner that better reflects and aligns with their specific journey in life. We believe that investment advisors must work with their clients to help them develop a goals-based wealth plan which reflects their attitudes, expectations, risk profiles and time-based goals.

The Shift To Discretionary Investment Management:

The vast array of investment options available to investors today is virtually limitless: stocks, bonds, mutual funds, pool funds, hedge product, structured products, private equity, real estate, income trusts and commodities. To effectively harness this vast array of investment solutions, investors are increasingly shifting their focus and approach away from individual securities and more towards a structured, managed asset program where-in specific investment strategies are applied to solve for defined, time-based goals within a risk framework that aligns with their specific attitudes, experiences and expectations.

Within a managed asset program (also known as discretionary investment management), we view this vast array of investment options simply as building blocks to be used in the construction of an investment portfolio. The single most important part of designing an investment program and the greatest challenge, facing investors, is in the determination of when, where and how to use each of these building blocks in designing an investment program that lines up with their specific and unique journey in life and falls within acceptable risk parameters. The investors in search of this type of approach are at times frustrated as the investment industry has been geared to selling product versus managing wealth and as such have not equipped their advisors with the training, coaching or the support tools needed to do this type of work.

Fiduciary Obligations Demand A Deeper Understanding Of Clients:

As these investors move to a managed asset approach, they will be evolving to a discretionary relationship with their investment advisor which, by definition, establishes a fiduciary obligation for the advisor to act in the best interests of the investor. This responsibility just cannot be fulfilled with a superficial understanding and knowledge of the investor. A  five question Know Your Client questionnaire, which is employed by a great many investment firms, just does not cut it, nor does a two dimensional questionnaire also used by many firms to place an investor at a single point on an efficient frontier using a single portfolio, which could fall in a range from “All Income” to “All Growth”. This simple approach suggests that all investors have a single time horizon. Most investors, we have worked with, generally have multiple goals over multiple time-horizons and to compound the problem would have differing risk tolerances for each. Investors seeking a goals-based approach must demand that their advisors work to gain the knowledge and understanding of the investor’s specific circumstances which will allow them to fulfill their fiduciary responsibilities to the investor. We believe that a multi-dimensional approach must be employed to gain the required in-depth knowledge needed to construct an investment solution set that reflects an investor’s realities.

The HighView Investor Profiling Process:

It has been our experience, at HighView, that to properly profile a client there are three discreet segments to the process: Discovery, Attitudinal Risk Assessment, and Goals-Based Planning. Each of these areas of understanding has a separate and distinct process designed to maximize the depth of understanding of the client’s circumstances, attitudes and goals.

Discovery – This segment of the profiling process provides important background information about the client. Our experience tells us that clients’ attitudes and expectations are very much influenced by their past experiences.

Attitudinal Risk Assessment- This segment should take the form of a questionnaire which will explore and assess the emotional/attitudinal risk profile of the client.

Goals-Based Planning- This segment of the client profile defines the client’s economic requirement for return.

We call this the HighView Investor Profiling Process.

About Mark Barnicutt

As HighView’s President, CEO, and Co-Founder, Mark Barnicutt is knowledgeable in all major functional areas of the family wealth business. He is an expert in wealth management, leading HighView with over 25 years of experience in the industry.
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