Would you invest your money in exactly the same way you invest your clients’?

Getting your investment process right.

Having a fully functioning investment process is vital to the success of any Financial Planning firm, yet in my consulting work I’m still coming across firms that don’t have one in place.

By fully functioning, I mean:

  1. There’s a clear investment philosophy that you believe in. That is, a philosophy where you invest your own money (or your mum’s money) in exactly the same way you advise clients to invest theirs.

  2. There’s an investment committee in place that regularly meet to discuss the latest investment research or data and, as a result, make decisions about the firms investment approach.

  3. There’s a complete set of educational documents and presentations used by all advisers within the firm to explain their investment approach to clients.

Take a moment to apply that checklist against your firm. Can you answer “yes, we have that” to each of these three criteria? If not, it’s time to get your investment process sorted.

Your options include:

  • Selecting funds yourself.

  • Buying in some external research to select the funds or constructing the portfolios for you.

  • Outsourcing to Discretionary Fund Managers (DFM) or a model portfolio solution.

Remember, your investment proposition is like the engine in a Ferrari. You wouldn’t pay £500,000 for a Ferrari engine on its own. It’s the total package that makes a Ferrari so desirable (if you’re into that sort of thing): it’s the shape, the interior, the smell, the way it drives. However, if there wasn’t a brilliant Ferrari engine under the bonnet, you wouldn’t be willing to pay £500,000 for the packaging on its own.

The same principle applies to your investment proposition. On its own it’s not that valuable. However when combined with your technical and tax knowledge and your understanding of people and their financial and emotional issues, it’s hugely valuable.

So, what are the issues you need to consider?


Whatever approach you adopt, you want it to take the least amount of your time as possible. This doesn’t mean neglecting what is an important piece of your business jigsaw puzzle, but you are in the advice business and that means having as much time available as possible to talk to clients and prospective clients. If you spend 15 hours per week on investment propositions, client time becomes very limited.

Ideally you should outsource as much as possible, because of the time saving you can then use to generate profits via other activities in your business.


How much genuine expertise do you have? If it’s not extensive (and for most advisers it’s not) then buying in the expertise makes a lot of sense. That’s more likely to be an external supplier than an internal resource unless you are a much larger firm.


Keeping your costs (and the clients’ costs) as low as possible is a major issue.

I have to be honest, I don’t advise clients to use external Discretionary Fund Managers (DFMs) or model portfolio solutions that charge basis points for the service. The cost to you and your business ends up being prohibitive in the long run.

One firm I currently work with is in the process of moving away from a service that charges via basis points because their costs are now up to around £60,000 pa. The basis point charge wasn’t so much of an issue when they were small but as they grow larger it’s becoming a major cost. Think about what stripping out that cost will do to the firm’s net profit margin once it’s removed.


Good quality reporting is another must. Can you obtain up-to-date reports easily for things like internal rate of return or time-weighted returns? Manually preparing these reports takes up inordinate amounts of time in many firms I have worked with.

The key thing to remember when you are designing your investment proposition is that you don’t need to over egg it. Investment services that report too frequently or trade too much just end up costing you and your clients money and creating an expectation that just isn’t necessary.

Your role is to educate clients as to why a lot of the complexity in the investment space is marketing fluff; attempting to make something pretty straightforward appear more complicated to justify higher costs. Don’t perpetuate that myth. Work hard to help clients understand why it doesn’t add value.

Simplicity works best in the investment space. When you are out there looking for your ideal approach look for straightforward, cost-effective solutions that have the best chance of delivering a great outcome in the long run for your clients.

Tim Hale from Albion Strategic Consulting

has 10 Top Tips for getting your investment proposition right:

1. Read widely and talk to others about how they do things.
    Here are a few get started resources:

2. Get your head together first, before you dive in. What do you believe in?

  • Active or passive?
  • Is your investment process a robust part of a larger financial planning service or is it the one thing you hang your hat on within your value proposition? (Avoid the latter.)
  • Will you be involved or will you delegate? In-house or outsourced?

3. Be able to explain your thinking clearly to someone else.

4. Aim to get three key things in place:

  • Internal documentation of the process (whatever you choose in step 2 above) and the risk decisions that you have made.
  • A simple, visual and understandable client facing suite of documents (most clients aren’t that interested in the details).
  • An ongoing, formal process for managing the programme over time.

5. Decide whether to do this preparation work yourself or get some external assistance. Where is your time best spent?

6. Whatever route you take, you need to be able to justify and control it (even outsourced propositions).

7. Believe in your approach.

8. Aim for simple yet sophisticated as the goal.

9. Understand the characteristics of the portfolios you create.

10. All firm principals and team members should commit to investing alongside clients (put your money where your mouth is).


5 thoughts on “Would you invest your money in exactly the same way you invest your clients’?

  • Absolutely Brett.

    I think it is called having skin in the game !

    I often wonder how many advisers had actually put their own money into the recent Keydata and Arch Cru debacles as so many seemed to think they were investing client money into worthwhile rock solid investments backed – or not it seems – by the regulator, networks etc.

    Not the point I guess will be the answer.,

  • One of the barriers to progres in this area, particularly for smaller firms, is the “investment committee”.

    In a small firm, there isnt usually someone else to talk to about your investment approach in a constructive way. DFMs arent the solution (for a whole host of reasons, not worth discussing here).

    Is there somebody out there who can act as a critical friend and help smaller firms have an investment committee of more than one (or two)?

    • Great request, Philip. I’ve approached many a DFM for their time, but they all want a %. I believe Abraham may offer this, will be interested in any other responses to your request

    • You could start with Tim Hale. If he can’t help directly or isn’t a fit for you he may point you in the right direction or suggest some other ways to address the issue.

  • Hi Phil,

    I have been ” promoted ” to Citywire,s Wealth Management side this year and if what I have seen of DFM.s and WealthManagers is anything to go by then you will sleep easier with a DIY approach to investment.

    Lots of big words and apparent unending hindsight but still not a lot of substance.

    Learn how to use Financial Express and you will soon create a best of breed portfolio for yourself.

    There is no crystal ball – honestly !


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