The benefits of professional investment decision-making

In today’s volatile markets, the time and effort required to effectively manage one’s own personal wealth has dramatically increased as business cycles have shortened and the volatility associated with traditional asset classes has increased. Another challenge for investors is the sheer volume of investment options available today. Clients can now access a vast array of opportunities, at reasonable costs which means that they have to constantly navigate through a regular stream of information and noise.

This is why a growing number of high net worth individuals are nowadays opting to delegate the decision-making process to experts in the field who are able to focus their effort on the strategic asset allocation and apply a disciplined and consistent investment approach throughout. A Discretionary Portfolio Management service (DPM) is generally the most viable option in these circumstances as it is specifically designed to provide investors with the peace of mind that their portfolio is being monitored regularly and action is taken quickly and efficiently as investment and profit-taking opportunities arise.

This relationship is generally governed by an Investment Mandate, which is an agreement that confirms a client’s financial goals, risk tolerance and investment objectives, and defines the boundaries on how the portfolio will be managed. The Portfolio Manager then creates a diversified portfolio of tailored-made investments that reflects the client’s financial situation and proactively makes portfolio management decisions on a day to day basis. The nature of the DPM means that a lot goes on behind the scenes. All of the development, analysis and implementation is carried out internally, so the client does not see all the details, just the finished product.

In order to promote the DPM as a viable option, wealth managers must show their clients that they can add value to their portfolio. This is generally done through a comparison of the portfolio’s performance with a representative benchmark which is agreed upon at the start of the relation. In this case, the investor would be looking for a consistent outperformance of the benchmark over time, net of all the fees involved. Fees can vary from one provider to another but the most common are management fees which apply a percentage on the total value of the portfolio to cover the costs associated with managing the portfolio on a day-to-day basis.

Regular meetings are held with the clients not only to explain the portfolio performance and ensure that the strategy is clearly and regularly communicated but also to gain a deeper level of understanding of individual clients so that their expectations are expertly managed. The recent drive towards a greater use of calls or apps has meant that clients are today much more engaged and constantly look for opportunities to receive real-time updates and analysis on their portfolio.

If you don’t want to think about your portfolio every day or simply do not have the time and would rather let an expert deal with it, our Wealth Management service at Calamatta Cuschieri might be right for you. Talk with us directly or visit our branches to find out more.

Disclaimer:

This article was issued by?Stephen Borg, Head of Wealth & Fund Management?at Calamatta Cuschieri. For more information visit,?www.cc.com.mt?. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.