You can’t be an expert on everything. You therefore depend on the knowledge of others for services you cannot perform yourself. The bigger the information gap between what the specialist knows and what the end consumer does determines the opportunity for unscrupulous behavior; it’s difficult to question a quote from your service mechanic when you can’t point out your radiator.
The investment industry has one of these information mismatches, and more than one story of its abuse. And because of the emotion attached to money, the fallout from bad investment advice tends to shatter trust, perhaps irreparably so. The unfortunate consequence is that investing becomes a grudge exercise instead of one that encourages involvement.
As a boutique asset manager our interaction with the end investor is limited. So it was with interest that we accepted an invitation from Glacier to participate in a client-facing roadshow through the North West and Free State regions.
Glacier (part of the Sanlam group) provides a platform through which financial advisors can access a variety of unit trusts. They perform thorough, independent analysis of these funds which advisors consider when building their clients’ portfolios. This roadshow bought all the stakeholders into one place in the hope of reducing the information gap.
The sessions were conducted using a panel format where managers were paired together based on the strategy they were asked to speak on. For example, we were sat with Coronation to debate the merits of a balanced fund. Questions from the moderators centered around what role each strategy should play in an investors overall portfolio, how each strategy generates returns and what the risks are, and how each manager was positioned given the prevailing market conditions.
It was this dialogue between managers that the end investor had come to see. It allowed them the opportunity to make a host of judgments that they could later use when constructing their portfolios with their respective financial advisors. This initiative by Glacier, and the financial advisors using their platform, to include their clients in how their money is managed has positive spillover effects.
By bringing end investors into the fold they tend to own more of the investment decision making process, imparting a sense of control and, importantly, an appreciation for what their advisers are faced with when tasked with building an investment portfolio. This move toward a collaborative effort should help to promote a more rational response from the end client in those critical periods where performance dips and emotional decision making enters the fray.
To be sure, not every investor will have the time or inclination to get involved in the detail of how their money is invested, and even those that do will continue to rely heavily on their financial advisors for guidance; there is still a need for an intermediary between asset manager and investor.
But perhaps their service needs to encompass more initiatives like this roadshow to improve transparency around how they’re investing their clients’ monies and why. There was a particular advisor we encountered that by many accounts is embracing this philosophy. Is it a coincidence that he had by far the largest number of clients?