Investing is a journey, not a destination

Investing is a journey, not a destination

Santi Burridge

We know life is a journey with the destination known. However, when it comes to financial management and advice, very little effort is put into the journey, with all the focus on the destination.

Santi Burridge

We know life is a journey with the destination known. However, when it comes to financial management and advice, very little effort is put into the journey, with all the focus on the destination.

If it was about the journey, we would be building services that allow us to remodel every one of our clients at the press of a button, remembering everything that is important to them. But we are not, with the dominant model still focused around fund and stock picking on expensive platforms delivered adviser by adviser and client by client.

This proposition is predicated on delivering a better destination (performance) and it is the model that is about to be disaggregated by the impending digitisation of investment management.

Can anyone tell me where the client is in a managed fund structure?

If I was pitching a managed fund I would say, 'Today I am going to recommend you invest in a product that provides no transparency or control, which does not care about your needs. We don't care about your tax position as it is too hard and we will let you know after the fact what tax you have to pay.'

Worse, we tell all those research houses that our tracking error is close to benchmark so we can keep our jobs.

It is almost impossible to proactively and relevantly communicate too, as we don't want to give away our secrets, while at the same time almost guaranteeing under performance pre- and post-tax and fees over time. If we are really scared about an impending crash, we will go underweight 5 per cent but still hold index weight assets.

Surely no one would use this structure – right? Can anyone tell me why this is remotely sane? Or is it that this is quite simply the worst journey possible created by those who care about mass distribution not mass personalisation?

Many years ago I started to question the sanity of this and it led me to realise it actually is worse than what I thought. After picking these managers we then send our cheques off to the platform providers and we cross our fingers that the day the funds are invested the market goes down while hoping for existing clients the market goes up.

Alternatively, we send our clients' portfolios to brokers who are incentivised to transact on the premise they can pick the next winning stock.

We all know the research over 10 years of active managers produces less than 1 per cent of funds that out-perform pre-tax, so why bother with this business model? The robos are going to come out and tell every consumer this and again, it is the same people who have been selling you that product that has added no value to anyone.

Why as advisers do we hope things go well with our clients? Why do we have little control over the journey, our businesses, or our clients' engagement in relation to what they own?

If the destination is known, we should all be focusing on creating the most highly engaged, personalised client experience, where control is at the core. We should be growing our businesses knowing full well every client is highly engaged, receiving a consistent yet individualised client experience and enjoying the journey of clients' lives. This will force the robo to change their business model quickly and we can discredit them back by making the clients realise that real advice is much more than a model SMA portfolio.

These services, not products, are out there, so go and collaborate and build your business a great journey that your staff and your clients love.



Implemented Portfolios is a specialist Individually Managed Account (IMA) service provider focusing on helping the financial services industry deliver great client outcomes.

 

Investing is a journey, not a destination
ifa logo
promoted stories

SUBSCRIBE TO THE IFA DAILY BULLETIN

News

Business Strategy