I am very fortunate to look after the investments of some great clients with amazing life stories. One client in particular comes to mind, the CEO of a large business. I always find CEOs particularly fascinating to speak to; they tend to ask strategic, high-level questions that need thoughtful and ‘to the point’ answers. One of the questions that I get from CEOs and business owners more than any other type of client is ‘what should I be thinking about’, or a related question, ‘what should I be asking’.
Such open questions can be challenging to answer but they are also incredibly effective. It allows me to put myself in the client’s shoes, to take that same high-level view and give a new perspective on something they might not have thought about.
The answer to these questions depends of course on the individual, however, I would like to share with you three points to think about, as follows:
If you had to buy every one of my investments all over again, would you do it?
This can often be something of an ‘acid test’. When a portfolio of investments gets ‘mature’ and has been running for some time, it can sometimes be the case that individual positions have run their course or seen their best gains. Going through the portfolio with the mindset of making every investment afresh can often bring about a change in view and can allow us to focus on the higher conviction ideas. As investment managers, we often go through this process ‘behind the scenes’ anyway but when looking after clients with lots of different investments, often across different financial institutions, this can be a very useful exercise.
When do I switch from accumulation to decumulation?
As a CEO or business owner, your focus can often be pointed towards wealth creation and nothing else. This can be largely habitual from years of achieving and growing your business(es) and your wealth and makes complete sense. There does, however, come a time when your focus might need to change to what we call ‘decumulation’. This is the idea of spending your wealth or giving it to others, either in a charitable capacity or from a legacy and inheritance point of view to family and friends. I have some clients who have little interest in this and tend to stay permanently in the ‘accumulation’ stage of life and that suits them well. However, it is important to at least think about the two stages and what would suit your personal circumstances and that of your family as the years pass. If you sell your business or have a ‘liquidity event’, this can often be a good time to review. Do you need an income from your wealth? Do you want to leave a legacy and does this have to start on your death or can it start before? The skills of a trusted adviser can be invaluable here in asking the right questions and probing accordingly.
What are the investments you are most worried about and why?
This question was posed to me by a client recently. In any portfolio of investments, there are bound to be some which we are very enthusiastic about and some that give concern. That is a natural part of investing. There might be an investment that hasn’t performed as expected and we are evaluating the next steps. Contrasting this, we have had situations in the past where an investment has performed exceptionally well and our thoughts turn to the sustainability of the price rise (a nice problem to have) and its influence on the make-up of the wider portfolio. This can be an extremely useful exercise for both the client and for me as their Investment Manager. The client gets a real insight into our thinking and thought process and often will have their own views which can be especially insightful given their business background. It also allows me as the investment manager to show our depth of understanding of the investments we hold and to elaborate on some of the work we do behind the scenes, which is by definition rarely seen by clients.
I hope this insight into the dynamic between investment manager and client is of interest and may perhaps have served as a good thought-provoking exercise.
If you would like to speak to me about any of your investment needs, please do get in touch either via telephone, email or via LinkedIn.