The volatile nature of world politics, coupled with the remaining undercurrents from the financial crash makes the business of wealth management a difficult science. Seeking expert investment advice is more relevant than ever, whatever the size of your wealth.
Global investment markets have experienced a great deal of turbulence over the past five years and whilst keeping in mind the last financial crisis was now nine years ago, global growth has been historically very low and certainly not assisted by global political unrest and geopolitical tensions. With all this in mind, how do clients look to invest their wealth whilst trying to mitigate against losses and make long term returns in the absence of meaningful returns from cash deposits?
We have seen one of the slowest economic recoveries on record. US GDP has grown just 12.3% from the fourth quarter of 2007 to the first quarter of 2017 which is an annualised growth rate of just 1.2%. Even these modest gains have not accrued to all equally. Orders for durable goods, a key indicator of broad consumer demand, have declined by 18% in real terms over the same period. In the UK, adjusting for inflation, average wages are actually 4% lower than they were in 2007. Youth unemployment remains incredibly high, in particular in Europe, where it stands at 18.7%, approximately double the total rate.
So how can investors find value?
Investors looking to seek wealth management advice from experts traditionally turn to independent financial advisers (IFAs), private bankers or investment managers for guidance on how to achieve their desired returns for a tolerable level of risk. I would say at this point that the advice we provide would typically be highly customised to an individual client’s circumstances. The world is complicated, people’s lives are complicated and making sense of currencies, countries, asset classes and where to place funds can be a daunting task. The role of an investment manager is to analyse and manage the potential return and risks of all opportunities, thereby planning for the future. This [analysis] is a daily task whether managing funds for individuals, institutions, pension assets or governments. The skill of matching the tolerance of a client with a tailored portfolio solution is as invaluable as it ever has been as a one size fits all approach does not work.
When analysing data on a macro level; global growth, inflation, employment alongside micro level for equities, fixed income (government and corporate), cash, property and alternatives, it is paramount to design an investment portfolio that delivers the expected returns for clients with varying risk levels. Typically risk averse clients will seek low volatility asset classes such as fixed income and cash in their base currency, while more adventurous clients will look for a combination of base and international currency exposure across more growth orientated assets such as equities. This asset class exposure can yield significantly different levels of risk and return whilst value and growth stocks also display differing risk and return characteristics. It is no coincidence that risk appears top of the agenda for most investors as this will dictate the assets used within a portfolio.
Navigating your way around this minefield, and the likely increase in volatility across different asset classes, will be key to maintaining and indeed growing one’s wealth in the years to come. A focus on income and steady returns with modest expectations, given the background of low interest rates, with the flexibility to remain nimble as market expectations change, will be the key to success.
However, there are solutions for all, whether you are looking to save £100 a month into a savings plan, you have an existing £50,000 pension pot or you have a nest egg of £1,000,000. Typically investors with in excess of £250,000 will benefit from a discretionary managed investment portfolio with regular face-to-face meetings to discuss strategy and returns whilst keeping the portfolio tailored for their financial goals.
By seeking professional investment advice, clients have the reassurance that the adviser they employ is properly regulated, qualified and has the necessary prerequisites in the disciplines the investor is looking to address.
The world is growing with an un-wielding amount of data and rapidly changing circumstances which require frequent analysis. For many investors this level of analysis is either impractical or just overwhelming and the need for expert advice is now more relevant than ever to ensure that investments are constantly aligned with the investor’s needs.