Recent conversations with new clients who are leaving their previous adviser, has seen many surprised by the extent of the decline in their portfolios. Their investments are simply not matched to their own expectation of the risk they wish to be taking.
When you meet an investment manager for the first time, one of the key points on their agenda for discussion with you will be risk. “We need to identify your attitude to risk”. You will most likely be handed a risk profile questionnaire to complete. This usually comprises 15 – 20 multiple choice questions. Once you have ticked your choices, the result of the questionnaire will be assessed and that will settle your risk profile. The questionnaire will be filed, and the conversation moves on.
The nub of this is always that if you take more risk, over time you will reap greater returns, but you must be prepared for ups and downs along the way.
However, in my experience as a Chartered Financial Planner the risk which engages my clients most, is the risk of running out of money. At some point in retirement, those valuations and charts you have been reviewing annually may indicate a time when your funds will no longer support the lifestyle you want. This could be okay if you have other assets or you’re happy to downsize from your family home. But for some, it may not.
Wouldn’t it have been better to have considered key questions, such as ‘How much can your portfolio sustainably deliver over the long-term?’ ‘What if returns aren’t as high as initial assumptions suggested?’ and ‘Should I have looked at scenarios where returns were not so strong?’. All of these questions can be answered with cash flow forecasting tools, which allow your financial circumstances to be modelled in their entirety and what-if simulations run.
Active financial planning wins over simple investment management. As financial planners, we do more than just manage your money. We look beyond your portfolio to assess your total financial picture, enabling you to make important strategic decisions about your finances from a position of knowledge. This helps open up a clear path to your secure financial future.
If you would like to discuss the areas outlined above in greater detail, please contact your usual Partners Wealth Management adviser, or call us on 020 7444 4030 for an initial conversation.
Daniel Clarke
Partner & Chartered Financial Planner
dclarke@partnerswealthmanagement.co.uk
020 7444 4064
The contents of the article have been prepared solely for information purposes. The article contains information on financial products and services and such information is designed for and addressed solely to individuals seeking generic industry information. This document reflects our understanding of current legislation. Past performance is no guide to future returns.
This article was first published in Find a Wealth Manager’s Investment Bulletin (December 2022 edition).