How to build a portfolio that reflects your personal values

Emma Foden-Pattinson explains why a deep understanding of a client’s circumstances, values and aspirations is the most important part of her role as an Investment Manager.

| 6 min read

An essential aspect of my role as an investment manager is to gain a complete and thorough understanding of a client’s circumstances including their future goals and aspirations. This will determine what their investment portfolio needs to deliver. Gaining an in-depth understanding of the people I will potentially be working with for many decades is both a vital and fascinating part of my job.

Building a solid understanding

Everyone has different life goals and personal situations. I aim to construct a portfolio that will act as a financial foundation to help meet both current demands and future aspirations. Only once we have examined all these factors together can we then agree on an approach that will support a client’s plans. I can then thoroughly brief the client about any potential pitfalls and risks to their desired approach, as well as highlight the potential rewards that could also lie ahead. It is through these conversations that I make sure that the client is comfortable with the overall balance between risk and reward in their investments.

This process forms the foundation of our relationship and I ensure that these conversations are allowed sufficient time and care. However, constructing a client’s portfolio is just the first step on a long-term journey that we will undertake together. We live in an unpredictable and rapidly changing world and events can emerge that alter the course of the world and financial markets significantly. Russia’s invasion of Ukraine and the Covid-19 pandemic are good recent examples of situations that emerge from left field and permanently change the relative attractiveness of specific investments as the world reacts.

I constantly monitor and adjust the portfolios that I look after to ensure that each client’s core objectives are met. The investment portfolio needs to reflect the complexities of the real world while at the same time still delivering on its core task of supporting the client’s future needs.

A client-centric focus

People’s life circumstances and personal objectives also develop and change over time, so regular dialogue is essential to ensure that their portfolio evolves in lockstep with both market realities and their changing hopes and plans.

I believe this client-centric focus, which is something that differentiates Charles Stanley from many of our peers, is key to managing a client’s money successfully. The knowledge and understanding developed through our conversations create an effective partnership which can be built upon in the years that lie ahead.

Life today can be complex as well as unpredictable, so individually tailored portfolios allow us to consider a wide range of areas that may impact or be important to clients. This could range from any expected withdrawals, such as school fees, to the exclusion of specific sectors that contravene a client’s ethical stance. Common exclusions include areas such as high-interest-rate lending, gambling groups or tobacco manufacturers, amongst many others.

The rise of ESG

More recently, I have noticed a rise in clients wishing to discuss the Environmental, Social and Governance (ESG) credentials of their portfolios. This has, in part, been driven by the rise in media attention around this area but is also because pandemic-related lockdowns gave people more time to consider what is truly important to them. This has led to many clients feeling it important that their portfolio be aligned with their moral values. ESG integration looks at “how” a company goes about its business, rather than simply considering “what” it does, and it’s important that clients understand how ESG can be integrated within their portfolios.

Whilst having better ESG credentials does not necessarily mean that an investment will generate superior returns, investors are able to take comfort from the knowledge that companies are being asked how they conduct their business both today and into the future.

This covers a myriad of factors but can involve examining whether a company is achieving a high standard of supply-chain practices or if it is taking real action to reduce carbon emissions.

By analysing and interrogating the data, I can now provide real evidence that will reflect the ESG credentials of a portfolio.

At Charles Stanley, we have always considered any non-financial factors that could affect a company’s prospects. Over recent years, there has been a rise in providers that specialise in the provision of ESG data. By analysing and interrogating the data that these services provide, I can now provide real evidence that will reflect the ESG credentials of a portfolio. I believe this significantly enhances the service we provide to clients who want a specific ESG focus built into their portfolio.

Over the past twelve months, momentum has been building behind ESG investing, resulting in a rise in investor demand for companies that have high ESG credentials. Some investors are concerned that these inflows are artificially inflating the share prices of some companies above their true valuation, potentially creating a bubble. Whether this is the case or not, at Charles Stanley we do not seek out companies that have high ESG ratings alone. This is just one factor amongst many to consider as we make our investment decisions.

Our investment approach

Our underlying investment approach involves identifying companies that are financially secure, operating in areas with high barriers to entry and with the ability to generate sustainable dividend and earnings growth. The potential risks associated with an investment are thoroughly assessed and analysed. Within this framework, we consider ESG metrics to be another measure of risk to which a company may be exposed. All of this contributes to my holistic approach to investment management. Taking into consideration a wide range of financial and non-financial factors to create a portfolio which delivers against a client’s objectives over the long term. Good relationships, knowledge and understanding are essential foundations.

Want to invest in the world around you? Find out how your investments can do good as they grow and reflect your personal values, with personalised financial advice and bespoke investment portfolios. Request a call back from one of our financial professionals, who can help you find the service to suit your needs.

Please note: This article was released prior to SDR and thus the information may not be in line with the Anti-Greenwashing rule but contextually is appropriate for the time it was written.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

How to build a portfolio that reflects your personal values

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