Congratulations for your 2nd year with High Rock. I have no doubt that you will do well as you are very passionate and dedicated to helping and providing top quality service and advice to your clients and investors.
It was quite nice to read your blog and I am carefully considering some of the analysis you make in terms of the macroeconomic trends.
As you know it has become a trend these days for most portfolio managers to head from the advisory model to the discretionary model.
Please let me know if you have a chance to give me your honest opinion on what you prefer between the two.
Thank you for your email and your congratulations.
Our clients have all expressed wonderful compliments about how we are handling the management of their wealth and portfolio strategies.
First and foremost your question about investment advice vs. discretionary portfolio management:
It really depends on the client’s needs.
Non-discretionary investment advice requires the approval, by the client, of each and every trade. This has to come about via a portfolio review (especially for any re-balancing or adjustments to the portfolio). If you have one or two portfolio reviews per year, then that is the only time a non-discretionary portfolio can be adjusted (so the timing for those portfolio adjustments may not be appropriate).
As we have shown (with the success of our tactical model), clearly, while there is still a need for long-term core portfolio structure, there are also opportunities (buying /selling of securities) that arise which require quick and decisive portfolio changes. To do this simultaneously for all of our clients would be impossible in the old-style non-discretionary portfolio.
That is why there has been a shift to more discretionary portfolio management.
However, that is not all there is to the appropriate management of your wealth.
The discretionary portfolio strategy has to be tailored, very specifically to each client. That is why we have 3 models (Fixed Income, Global Equity and Tactical) so that after we complete a Wealth Forecast and determine your goals, risk tolerance and time horizon for achieving your goals, we then determine the structure of your portfolio with the parameters of your exposure to each model carefully determined with you. As we build a portfolio, we can be selective as to the appropriate time for buying assets to get the best possible value (this is where we utilize our over 65 years of collective experience). We then will have reviews at least every 6 months to determine whether the strategy is progressing toward your goals and if any adjustments to the strategy are required.
Certainly there is the trust factor at play: that we are buying and selling appropriate assets for your portfolio (within the agreed upon parameters), however as we are buying those same investments for our own portfolios, you can be rest-assured that we are not buying any random assets just to put them into your portfolio.
As well, you are able to see each and every security you own in your portfolio (on-line) and we are available 24/7 to explain the significance of any asset that we purchase. We will send each client a quarterly summary of their portfolio and its performance as well as a letter discussing our view of financial markets and comparative bench marks and an Independent Review Committee letter stating that our portfolios are indeed invested in the same assets as our clients.
From a client’s perspective, I can’t see how non-discretionary investment advice can be anywhere close to being as effective.
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Scott Tomenson,CIM Managing Partner, Chief Investment Strategist