Over the years we have been asked many times for support and guidance from our clients as to whether we think their investments are performing well enough, should they be doing anything different, and who should they be doing it with. We cannot provide investment advice, however, we can certainly help lift the mists which sometimes surround communications from investment houses, and here’s how.
Trustees are often simply looking for a steer, a benchmark or a trusted friend when things begin to look a little rough and change looks like the likely remedy. Our Investment manager review document can help with this process, but here is a brief synopsis.
Trustees cannot delegate the decision or the responsibility for their choice of investment manager but the process of choosing can be helped enormously by a good independent and qualified investment advisor. However, it’s important to remember they will only provide advice and not a procurement service.
As is usually the case, the more time you (or your advisor) spend researching and meeting investment companies, the more likely you are to find the one which sees things as you do, will instil you with confidence, will help you sleep soundly. That’s all well and good if you know what a good investment manager looks like, or can agree on what good investment is – but is that really possible? It usually boils down to how they answer your questions and how well you understand the answers.
What to ask an investment manager
The starting point is your Investment Policy. To write one you need to think about:
Your risk threshold – how much risk are your prepared to take to make the most of your investments?
Your projected spending – are you spending out the capital or income only? Do you have plans to increase this over time or for a one-off period?
Ethical investments – you are likely to want to invest in an ethical portfolio, but what sacrifices, if any, are you prepared to make to do so? For example, will you be happy to have a slower return if required?
So, once you have your policy and have window shopped for a shortlist, what do you talk to them about? Here are some suggestions for those important ‘beauty parade’ meetings:
- What is their Investment Strategy – how would your portfolio be constructed, and why?
- Fees – what will it actually cost?
- Reporting and liaison – what and who you will see and how often?
- Experience and strength – is the team and the firm solid?
- Compatibility – are you comfortable with the firm’s style and its people?
To see a thorough checklist of the key questions that your prospective investment manager must answer, and some others points you might like to think about, take a look at our Investment Manager review document.
Finally, whilst investment managers may work at a remove, they are a key part of the team. Rather than just invite them to a trustees’ meeting once a year, it can be cost-effective to schedule review meetings in the interim. After all, the best business decisions are made when everyone in the team is focused on the same outcomes. Ultimately, your investment manager’s priorities should reflect yours.
The Trust Partnership