By Mark Barnicutt on February 6, 2011
In meetings with prospective clients, I frequently get the question: “Where’s the best place to invest?”
Given that the investment management industry is so “product” and “return” focused, I think investors are somewhat shocked when my response is:
“I don’t know. It depends on your goals & risk tolerances?”
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.
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 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 finds the “right fit home” for each of his/her clients as it’s such a unique experience. As a result, investors who buy generic investment advice are like home buyers who purchase the “model home”…..it’s a pre-packaged solution that is easy and looks good at first but after you live in it for a while you start to realize that it lacks many of the unique features you were seeking.
It is for this reason that at HighView Financial Group we often describe ourselves to clients as “architects” of investment portfolios. The global investment industry has a wide variety of “investment products” that are well-engineered such as Canadian Equities, Canadian Fixed Income, Global Equities, etc.. 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 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 the risk that client investment objectives will not be attained and client’s risk tolerances will be violated.
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