‘We put our clients first’

These are familiar words in the finance industry. Yet somehow the promise of putting clients first never quite seems to translate into the necessary behaviour and action. Crisis after crisis, scandal after scandal, it is the clients who suffer.

To truly serve clients well, you have to address the paradox that lies at the heart of investing.

Investment involves uncertainty, but people crave certainty. Serving clients well may, at times, make them feel uncomfortable.

This challenge is amplified by financial markets, as they encourage behavioural biases. These biases often lead to poor investment decisions, as it creates a herd-like mentality.

Consider the nature of market movements. In the short run, markets tend to be driven by momentum. In the long-run, they tend to revert to the mean. Human nature is usually drawn to momentum.

For an investment manager to be successful, they must be prepared to go against the consensus and this often makes people feel uncomfortable.

As financial planners, you bear the weight of this responsibility too. Managing your clients’ behaviour in order to promote their best interests can at times be challenging. Below, we introduce how we at Ruffer have tried to address the challenge.


Structural separation

To enable us to make good investment decisions for our clients we have structured our business using a threefold logic.

First, our research team focuses solely on markets. It is separated from the day-to-day interactions with clients as we believe this allows the research team to generate ideas without the psychological influence of what may or may not be comfortable for the client. We believe this should lead to better investment decisions.

Second, our portfolio managers look after the relationship and manage their clients’ portfolios. They do this within the constraints of a broad framework of asset allocation and ideas set out by others in the investment process. This means portfolio managers are able to communicate the meaning of a portfolio structure and its components directly to their clients.

Finally the research team and the portfolio managers have an open, two-way engagement. This needs to be robust in order to bear the strain in periods of dull performance.


Putting this into practice

At Ruffer, we have experienced the discomfort of going against the consensus first hand. During the late 1990s technology bubble, and again in the run-up to the credit crisis in 2008, we avoided the mania. By not holding technology stocks or leveraged credit instruments, we attracted both frustration and discomfort from our clients.

Our aim is to deliver consistent positive returns, regardless of how financial markets perform. Therefore our preoccupation has always been with not losing money, rather than going gung-ho for growth. As a result, our investment philosophy and style requires a degree of patience.

We often use the metaphor of a tractor on the motorway: in an ageing bull market, we may plod in the slow lane, sports cars whizzing past us. It’s only when the motorway sinks into boggy marshland that a tractor proves to be a wise way to travel.



We are looking to partner with financial planners who understand this model and support our approach.

Protecting portfolios from poor investment choices can at times be testing on the client relationship for both investment managers and financial planners. To endure this test we must build trust, therefore we are always open about our approach and mistakes, frank about risks, and transparent about what can go wrong.

This article was created for the DISCUS website by Toby Barklem, Business Development Manager at Ruffer. You can find out more about Ruffer’s discretionary investment services here ›

A limited liability partnership, registered in England with registered number OC305288 authorised and regulated by the Financial Conduct Authority © Ruffer LLP 2018. The views expressed in this article are not intended as an offer or solicitation for the purchase or sale of any investment or financial instrument. The information contained in the document is fact based and does not constitute investment advice or a personal recommendation, and should not be used as the basis for any investment decision. References to specific securities should not be construed as a recommendation to buy or sell these securities.