I Get Mail!
Hi Scott,
Congratulations for your 2nd
year with High Rock. I have no doubt that you will do well as you are very
passionate and dedicated to helping and providing top quality service and
advice to your clients and investors.
It was quite nice to read your
blog and I am carefully considering some of the analysis you make in terms of the
macroeconomic trends.
As you know it has become a
trend these days for most portfolio managers to head from the advisory
model to the discretionary model.
Please let me know if you have a
chance to give me your honest opinion on what you prefer between the two.
Thank you for your email and
your congratulations.
Our clients have all expressed
wonderful compliments about how we are handling the management of their wealth
and portfolio strategies.
First and foremost your question
about investment advice vs. discretionary portfolio management:
It really depends on the
client’s needs.
Non-discretionary investment
advice requires the approval, by the client, of each and every trade. This has
to come about via a portfolio review (especially for any re-balancing or
adjustments to the portfolio). If you have one or two portfolio reviews per
year, then that is the only time a non-discretionary portfolio can be adjusted
(so the timing for those portfolio adjustments may not be appropriate).
As we have shown (with the
success of our tactical model), clearly, while there is still a need for
long-term core portfolio structure, there are also opportunities (buying
/selling of securities) that arise which require quick and decisive portfolio
changes. To do this simultaneously for all of our clients would be impossible
in the old-style non-discretionary portfolio.
That is why there has been a
shift to more discretionary portfolio management.
However, that is not all there
is to the appropriate management of your wealth.
The discretionary portfolio
strategy has to be tailored, very specifically to each client. That is why we
have 3 models (Fixed Income, Global Equity and Tactical) so that after we
complete a Wealth Forecast and determine your goals, risk tolerance and time
horizon for achieving your goals, we then determine the structure of your
portfolio with the parameters of your exposure to each model carefully
determined with you. As we build a portfolio, we can be selective as to the
appropriate time for buying assets to get the best possible value (this is
where we utilize our over 65 years of collective experience). We then will have
reviews at least every 6 months to determine whether the strategy is progressing
toward your goals and if any adjustments to the strategy are required.
Certainly there is the trust factor
at play: that we are buying and selling appropriate assets for your portfolio
(within the agreed upon parameters), however as we are buying those same
investments for our own portfolios, you can be rest-assured that we are not buying any random assets just to put them into your portfolio.
As well, you are able to see
each and every security you own in your portfolio (on-line) and we are available
24/7 to explain the significance of any asset that we purchase. We will send
each client a quarterly summary of their portfolio and its performance as well
as a letter discussing our view of financial markets and comparative bench
marks and an Independent Review Committee letter stating that our portfolios
are indeed invested in the same assets as our clients.
From a client’s perspective, I
can’t see how non-discretionary investment advice can be anywhere close to
being as effective.
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