The Porsche bumper sticker always makes me smile when I see it on my friend Dan’s 30-year-old, clapped out Bedford mini-van. Mind you it overnights between two proper Porsches on his driveway.
Oddly he’s one of the most self-effacing individuals I know having worked hard to build his prospering property business. This involved him taking measured and calculated risks while supporting his family along the way. And as with so many clients it’s his passion for the work that’s the real driving force behind his success.
However, the reason that I smile at his bumper sticker is not the irony of the wording but his rationale for owning the van in the first place.
I see it as managing the right outcome. Dan has two large dogs that need plenty of walking in the distant countryside. His hobby is music which means he also drives around a load of kit and so he needs a vehicle that can manage it all without giving him cause to worry.
Outcomes define investment strategy
At TACIT we like to think that having an outcome focus like this is crucial when designing an investment strategy for a client. First of all we try to make it simple, like Dan’s van, and then we focus on an outcome that also shouldn’t cause sleepless nights.
But what about the Porsche? Well we believe that Dan’s van is the stabiliser. It just steadily gets on with things and fulfils all of his needs. While the Porsche helps him enjoy the growth of his business offering a reminder of his achievements. The bottom line is both vehicles allow Dan to realise the right outcomes. It’s a simple method and a straightforward approach.
Over time simplicity seems to have disappeared from the makeup of effective investment outcomes for client’s portfolios. Here, we’re keen to ensure that we revisit the basic principles of looking to outcomes in an unambiguous and clear manner for our clients and their advisers.
Stabiliser / Risk Approach. 3 Year to 31/10/2018
Often this may be seen as superficial as we’ve distilled core factors for their consistent outcomes into strategies that best match a client’s needs. The technical bit is Tacit’s proprietary investment management process. This considers “factor” mean reversion over investment and economic cycles and brings together the elements of the asset allocation road map highlighted above. You could take this as the stabilisers and core areas of building a growth portfolio.
Conviction, focus and a degree of contrarian thinking
Whilst navigating towards a client’s outcome as opposed to just focussing on relative performance, we find that this provides strong relative and risk-adjusted results over the long term.
However, it’s important to balance outcomes with delivering the right service levels because every client is unique. Complementing their needs is also essential as we shape or provide bespoke inputs.
Some common elements here might be:
» Effective management of appropriate investments across respective tax wrappers
» Management at relationship levels rather than individual portfolios
» Capital Gains optimisation and management across relationships, whilst remaining within the confines of suitability
» Cherished holdings management
» Investment style preferences
» Intergenerational coaching and wealth transition
Why are outcomes important?
Family wealth is increasingly the momentum of importance and over the last several years has become hugely more portable both from a tax efficient and also ease of transition perspective. Outcomes are no longer relative but defined by client’s family needs, this is extremely important for advisers as it builds longer term intergenerational relationships and also longevity of the multi-generational advice model.
It also may require support from investment management professionals in shaping and helping both with communication, coaching and management.
To paraphrase Warren Buffett’s understanding of complement: “It’s easier to look back than look into the future”
Here at Tacit we believe having a focus on an outcome is a must and our man Dan with his van, and we forgot to mention his three daughters, is the textbook example.