Who do you turn to when managing your investments never leaves the bottom of your to-do-list? Emma Parkes states the case for discretionary management.

Investing in equities, ETFs, bonds and even property remains an extremely effective way of increasing overall wealth over time.

It can provide extra firepower in many areas of one’s financial life—from helping a child through university to increasing the lifespan of one’s pension pot.

But unfortunately, there’s a large catch: truly effective personal investing can be a real headache.

Firstly, investors must figure out their investment goals and over what time horizon they are willing to invest. Then, they must select the products that will offer them the best shot at achieving these results.

To do this effectively and efficiently requires considerable specialist knowledge but results are by no means guaranteed even if they are.

To truly stay on top of things, an investor must constantly monitor their portfolio to ensure their goals are being met and adjust asset weightings, assess potential currency risks, plan for any inflationary effect; the list goes on. It can result in a huge amount of complex research and, if not managed correctly, could be financially costly.

After all, without adequate oversight, there’s a strong chance one’s capital will unnecessarily be exposed to far more risk than if it were sitting in cash—entirely undermining the point of investing.

Such a time commitment can be a full-time job for many of us.

Indeed, amid the hustle and bustle of everyday modern life—whether it's working, paying the bills, looking after the kids, or any one of the many other tasks we complete on a regular basis -  there’s simply not enough time to even cast an eye over all of the information that impacts the performance of our investments, let alone react to it in any meaningful way.

This is where Discretionary Fund Managers, or “DFMs”, really earn their crust by managing investment portfolios on behalf of their clients. Not only do they take on the complex ‘heavy lifting’ on clients’ behalf according to their needs, they also adjust client portfolios when necessary, sparing clients the issue of missed opportunities or potentially high losses.

These investment professionals begin by selecting a diversified portfolio of assets, factoring in everything from how much their clients have to invest and the level of risk they are willing to take on to meet their financial goals and their tax position.

Then, once the strategy has gone live, they will make ongoing decisions about the portfolio at their own discretion, periodically updating clients on their performance and reacting to any specific requests.

The DFM approach offers a wide range of extremely significant benefits to today’s busy investors when it comes to making their money work for them.

  1. The guidance of investment experts

Becoming an investment expert like a DFM takes many, many years of experience and—even by this point—consistently strong performance is not guaranteed. If we learned anything from 2020’s Covid pandemic, it is that the future performance of the market is difficult to predict with accuracy.

What DFMs can offer savers, however, is the comfort that their money will not fall into any of the many completely avoidable traps that often catch out the unwary amateur. This includes everything from allocating too heavily to individual stocks, to not adequately diversifying a portfolio or allowing emotion and fear to influence decisions.

By avoiding these sorts of mistakes, DFMs give clients the greatest chance possible of realising their financial goals.

  1. A consistent approach to investment goals

Having financial goals in place is one thing for amateur investors, but actually sticking to them is another.

The investment decisions one took when constructing a portfolio can become very hard to back when the assumptions upon which they were made become challenged.

Indeed, amid daily onslaughts of market speculation, swinging share prices and constant fears around selling or buying at entirely the incorrect time, it’s easy to make rash and often entirely unnecessary moves.

Again, there’s no guarantee that DFMs will always be correct, but good DFMs, looking for steady growth on behalf their clients, will ensure that any decision made will be backed up and rationalized by years of experience and expertise.

This means that decisions are not only as objective and disciplined as possible but have also been made entirely in line with the goals of the clients to whom the cash belongs.

  1. A reduced time commitment

When it comes to managing a portfolio, there are a whole host of different things that can end up eating in to time that every day investors don’t necessarily have.

There’s the daily checking of investments and the subsequent reactions that must often be made. There’s the wading through a practically endless onslaught of news, speculation, opinion and analysis in a bid to try and predict what might happen next in the market and generate new ideas.

  1. Less paperwork

In choosing to invest for yourself, you need to be prepared for the enormous avalanche of paperwork that arrives every time a switch, a transfer or a new investment is made. Unfortunately, electing to work with an adviser does not necessarily mean escaping this burden. If their proposition involves the management of your investments on an ‘advisory’ basis, then you the client have to approve not just the initial investment but all subsequent transactions. Want to make a withdrawal? – well, there will be a form for that.

In a world where our day-to-day lives are increasingly dictated by administration—mortgages, insurance, gas and electric, the list goes on—who really wants another layer of forms to fill in of an evening?

Handing investment administration over to an experienced DFM can free up time that would otherwise be better spent.

At Church House, we manage our clients’ money on a discretionary basis. This frees them up to use spare time to enjoy life and gives them the peace of mind that comes from knowing the professionals are safeguarding their precious wealth.


Important Information

The contents of this article are for information purposes only and do not constitute advice or a personal recommendation. Investors are advised to seek professional advice before entering into any investment decisions. Please also note the value of investments and the income you get from them may fall as well as rise and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.

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