Remember our fear as children when the storm was noisiest, the wind whistled at the windows, rain pelted on the roof and the lights went out because of a power cut. Remember too how having someone there to hold our hands really helped. It did not mean that the wind stopped blowing or that the lights came on - it just meant we had someone close to us we could trust.
A client came to me the other day and asked me to review her portfolio. She was not sure if the review would add anything, but she was nervous and prepared to listen to any advice she could get. She was not sleeping as well as she wanted to.
The client, I'll call her Betty, has a reasonably sized portfolio which had been invested for several years and had performed very well. Let's face it, a lot of portfolios have performed great over the past 8-10 years. However, while Betty was not a headline investor by any means, she reads the newspapers and there is a lot of bad news around. As tends to happen, bad news begets bad news and Betty needed some assurance.
A member of Betty's family had also asked that she get another perspective on the investments. This meant that I needed some time to research and understand those investments, and then help Betty and her family understand the portfolio. For Betty, "understanding" meant knowing how some funds had performed, what they were worth, how accessible they were and whether she could get the money needed to replace her car. That was the result I wanted too - it did not mean making wholesale changes to her whole portfolio.
As I guessed, there was not as much clarity as there needed to be. Sitting down with her, and explaining the various funds and investments she had meant that she was able to make more informed choices about what to use to replace her car and what was best left alone.
It also meant that I needed to understand what Betty wanted. The process was much more than just researching the various funds Betty had been invested in and how they had performed. It was more than ensuring any redemptions were from funds that would not crystallise losses.
Part of the advisory process was taking the time to understand what Betty's needs were, what the timeframe for those needs was and how best to achieve them while taking the best advantage of her investments as we could.
By understanding her investments better, Betty felt more comfortable about her decision as to which funds she could use to buy the car she needed. Our discussions meant that it was her needs that drove decisions - as should be the driver in all investment decisions. It is not about what an ideal investment portfolio should look like although risk profiles and weightings need to be accounted for.
By the end of the process, which took about 2 weeks once discussions were held and questions were answered, Betty was very comfortable with things. Her comfort was not because all the uncertainty in the markets had been removed and there was no risk in her portfolio. It had come from a better understanding of her situation and the knowledge that buying her car was able to be done without making losses.
The process for Betty was similar to what we have done for our children, or what was done for us when we were children, and the storm outside scared us so much that sleep was beyond us. The markets at the moment have been described as experiencing a "perfect storm." Do you feel that you do not understand your portfolio as well as you want? Let me help - Betty is sleeping better!
I have written this newsletter for general information only and it remains my opinion. I have made every effort to ensure accuracy. I recommend that readers seek advice prior to acting in reliance on any of the matters discussed in this newsletter. Neither the Searells Financial Services Limited nor any person involved in the production of this newsletter accepts any liability for any loss, damage whatsoever that may directly or indirectly result from any opinion, information, representation or omission, whether negligent, or otherwise, contained in this newsletter.
