Aside from the various investment structures there is the question of investment style or philosophy. Some advisers enthusiastically take up a very focused approach to investment and will demand one particular style which reflects their beliefs. I use the word ‘belief’ rather than knowledge since no one really knows, at least until you reach for the hindsight glasses.
We are now seeing more advisers question the merits of certain investment religions and looking for a common-sense approach and provision of different options for different clients. For instance a passive option where cost is the main focus but also an active option for clients that need it. In particular clients at retirement who intend to remain invested do need careful attention and tracking the market will just not do for many in this situation.
Lawrence Cook is director of marketing and business development of Thesis Asset Management
Key questions to ask DFMs
Advisers intending to appoint a DFM to invest their clients’ money should be prepared to make sufficient enquiries in order to find the most appropriate DFM. For example, advisers may wish to ascertain the following:
· The DFM’s investment process
· Whether there are tracking errors on benchmark indices and, if so, why?
· The actual performances of DFM clients’ portfolios compared to the four Asset Risk Consultants indices
· The DFM’s definition of the level of risk for the different asset classes
· Whether there is a preference for investment trusts over unit trusts. Stockbrokers tend to prefer the former, but they generally have a greater propensity to underperform falling markets and can be difficult to trade.
