An adviser view

Implementing Goals Based Investing

Gareth Jakeman, Managing Director, Praescius Financial

Managed Accounts are three things to us

First, they are a business system that reduces risk, concentrates portfolio thinking and allows the execution of both portfolio ideas that are fit for time and purpose (in a manner that is deliberately consistent with our goals-based advice model).

Second, they are an amazingly flexible structure. They have allowed us to create a healthy competitive tension that has reduced the costs to our clients. For our asset management partners that embraced this, this has created higher visibility and an accountability to get things right that previously did not exist. For our clients, they are no longer constrained to unitised structures that encourage the status quo – managers can be replaced, CGT managed, transaction costs reduced. They can also vote with their feet and move the assets out of our stewardship if they don’t feel that we are delivering value. Rather than be threatened by it, we think that this is healthy and keeps us focused on what our job is.

Third, and most importantly, they are driven by acting in our clients’ best interest. Statutory duty aside, they are the most effective way for us to manage the full gamut of risks – particularly sequencing risk with the way we have constructed our mandates.

"Managed Accounts appealed to me as I could see the immediate efficiency gains in compliance, investment outcomes and standardisation of results across the business."

Changes to our advice process

The key change was the emphasis of a goals-based approach vs the traditional approach to risk profiling. It means we can evidence an individual risk discussion with our clients, based on their specific goals and timeframes. This leads to better management of sequencing risk and ability to materially decrease the likelihood of the poor outcomes that became the focus of attention post the GFC.

Once we did this, we were better able to shed the institutionalised thinking which has to cater to a broad church of skills. Instead, we thought about the client first, what they need and how we were going to deliver that in a way that ticked all the boxes.

September 2017