Investors are motivated to appoint an investment consultant for different reasons. However, there are perhaps four common threads.
Communication
Like any area of business, the investment world has a language of its own. Some of the terminology is easy to understand;
some is open to mis-interpretation. Surveys suggest that the most common reason for investment managers being
dismissed is communication failure rather than poor performance versus peer group.
Diversity brings complexity
Few investors wish to place all their investment assets with a single fund manager. Rather, they prefer to employ several
investment managers, often with differing investment mandates and styles. This diversity, whilst delivering risk reduction,
makes portfolio design and analysis more complex.
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Past performance is no guarantee of future performance
Despite the widespread usage of past performance in marketing by investment houses, the ubiquitous disclaimer states that the
future is uncertain! Why? Because economic conditions change; asset classes move in and out of favour; investment managers move jobs;
investment companies acquire and are acquired.
The only constant is change
A successful investment strategy needs to recognise that change is inevitable. The catalyst for change might be investor led, through changing circumstances and aspirations, or driven by manager related issues, such as performance and service. Whatever the cause, it is essential that the process of change is actively managed. Anecdotally, the greatest performance drag private investors suffer is not attributable to poor manager selection but to a lack of change management. |
