What would Winston Churchill do?

Aside from health and wellbeing, the financial affairs of the wealthy are undoubtedly a primary concern, taking up both their time and mental energy. We have observed that all too often a robust, and risk managed wealth and financial plan is frequently an after-thought, and something that is seldom drawn up and implemented. Where there is a plan, it regularly lacks the breadth and understanding of an experienced wealth advisor and does not consider the harsh realities of the various economic environments.

Review and reflect
The complexities involved in financial self-management are evidenced by the well-intended, albeit often ineffective, attempts to learn what in essence is a foreign language. Additionally, wealthy individuals are actively targeted by a myriad of self-serving advisors, and hangers on, all looking to sell them something. In the end they start to wonder: “Who can I really trust?”

When considering your own wealth plan, it is worth asking the following:

  • Are the incumbent advisors good enough?
  • Do they have a joined-up plan?
  • What was the selection criteria?
  • When and how were they appointed?
  • What is their role exactly?

Where there are multiple advisors, often little, if any due diligence has been employed in their selection. Once in place, they seldom work collaboratively with one another, if they are aware of each other at all. This can create great inefficiencies, missed opportunities, and exacerbate risks.

To illustrate this point, following a recent meeting with a newly wealthy entrepreneur, we discovered that the client had a multitude of wealth and investment managers, who were all trying to invest in the same way. However, and importantly, they were not aware they had all been given the same basic instructions and were not communicating. They simply had a mandate to invest without reference to a singular, over-arching wealth plan or objective.

Conflict, risk, and a lack of alarm bells
It did not surprise us to discover that the investment decisions being made were at odds with each other. At times conflicting investment decisions were being made by each wealth manager and in terms of investment returns the result could be a “zero sum game” at best, and a doubling of risk at worst. The outcome was inevitable.

The warning is clear:

Unless you have on over-arching wealth advisor who has been specifically appointed to create, implement and manage your own wealth plan, there is a very real danger that your objectives are unlikely to be fulfilled, and that the journey will be fraught with risks and inconsistencies.

Based on what we’ve learned from clients we began asking ourselves a few questions, such as: “How many people really know whether this is how they are currently being advised?”  Usually there aren’t any alarm bells, warning signs or clues for people that aren’t from a financial background, and even then, it is very difficult to ascertain exactly what is happening. The existing wealth managers themselves are frequently well known, trusted brands, so it’s understandable to assume that they should alert clients about these risks and dangers.  In our experience this is all too common.an occurrence.

Diversification, leadership, and strategy
Like most people, we strongly believe in diversification. However, by appointing various Wealth Managers and advisors, what is the risk that you are trying to mitigate? And what is your goal? In the example above, the client was diversifying, but at the wrong level, by spreading funds across different wealth managers, rather than via different underlying investment holdings or positions, with one entity in charge.

Empirical evidence suggests that asset allocation is the main driver of investment returns, and not individual stock or star manager selection, which are often fallible, prone to human “gut-feel” and are frequently inconsistent.

We, like you, believe that when running a company, it is important and good sense to have one strategic plan and one CFO, rather than four or five. It is therefore strange to discover quite how many clients have not taken the same approach with their own personal wealth and financial wellbeing. What is needed is an integrated approach under one plan

Winston Churchill famously said: “He who fails to plan is planning to fail”, however, having a plan is not the same as having the plan.

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