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                   Our Advice Philosophy

We try to keep the process of investing as simple as possible.  Warren Buffett said "There seems to be some perverse human characteristic that likes to make easy things difficult."  In the financial area investors are often misled or confused, sometimes deliberately but sometimes because those providing the information do not take the trouble to use plain English.

How We Started
 
We have been working with clients and their investment needs for over 16 years, and I set up Peak Portfolio Management Ltd in 2003. Our clients are individuals, families and trusts.
 
We have changed
 
We have examined and sifted through the accumulated experience from the last 16 years, and decided to move in the opposite direction from the conventional advice provided to clients by the financial advisory industry.
 
… because the rules of the investment world have been re-written
 
As we principally work with clients heading for, or in retirement, we recognised that the world that we live in has changed. Expectations about how different investments and asset classes can help clients through their retirement planning haven’t worked for the current generation of retirees. 
 
Looking ahead, whether we get deflation (falling prices for property or shares) or asset price inflation (rising asset prices), we are implementing a new approach for all of our existing and new clients.
 
A New Approach
 
And that approach is based firstly on improving the likelihood that clients meet their goals and needs – based on their current levels of capital.  
 
To do that, clients need to be able to get to the bottom of what is really important to them and their families.
 
We recognise that peoples goals and needs change, and that their timeframes for needing to access their investments can often change quite quickly, particularly for clients in their fifties and sixties.
 
While people often have a murky understanding around the potential upside and pitfalls of cash bonds, property and shares, in our experience they all enjoy and can get involved with setting out their spending and other lifestyle needs. What we can then provoke is a discussion and debate around the relative importance of these goals, and how clients would feel if certain of those goals are met, or not.
 
This we have found can lead to a clearer understanding of what is important,  and therefore different scenarios and choices around spending, decisions around the timing of retirement, saving goals, and eventually trade-offs on the selection of suitable investment portfolios.
 
Why an understandable approach helps
 
Many people don’t understand or are uninterested in the complexities of investments or investment markets. Often they are not totally au fait with the workings of their own portfolios. So it is no wonder that they are inclined to head for the hills when they see negative returns and gloomy media headlines about investment markets.
 
A better approach is one that allows clients to get fully engaged in setting out their needs, goals and cash flow requirements. Then with input from their adviser, they can map those requirements to appropriate, but separate investment portfolios.
 
Having separate compartments or portfolios to meet goals is critically important to clients’ understanding of the connection between their goals and where their money is invested.
 
We are working with what we consider are understandable and universal goals that are increasingly being utilised by professionals with private clients, as set out in the table below.
 
 
 
 
 
Goal
 
Aim
Cash
 
To provide a source of capital, by investing in income-oriented assets.
 
Income
 
To provide a degree of stability to your investment, by primarily investing in income-oriented assets using an active investment management approach.  
Inflation 
To mitigate the impact of inflation on your investment over the medium and/or long term by investing in income-oriented and growth-oriented assets using an active investment management approach.
 
Growth
 
To grow your investment over the long term by investing in income-oriented assets and growth-oriented assets using an active investment management approach.
 
 
 
Understandable investment portfolios to meet needs and goals
 
We utilise portfolios that are understandable and suitable for individuals' and families' needs and goals, rather than those that may work over very long time frames (25 years plus) for professional fund managers and pension funds.
 
We realise that clients are a lot more conservative than they think - especially in times of economic stress. In the current environment, we have seen bigger variations in the value of growth assets – businesses, shares and property - than most clients planning for their future are comfortable with.
 
To address both of these aims, we put in place for each client a clearly understandable set of portfolios – one for each of the goals set out above, as appropriate. These portfolios are designed specifically to be accessible and liquid as necessary, and to have capital protection strategies applied to reduce the size of negative returns when pursuing growth goals.
 
We have identified and are working with investment managers who are putting together portfolios to meet these goals for clients. 
 
This allows us to start our regular reviews with clients checking to see how their lives and goals are changing, and the implication for their cash flow needs - rather than the ephemeral hunt for the next big asset winner.
 
The change is re-invigorating our interactions with clients
 
What started as a sensible, but significant change has helped unify the way that we provide financial advice. We are genuinely pleased with the reaction from the clients that we have talked with recently. 
 
Clients who feel that their goals are being recognised and addressed, with portfolios that they can understand are happier and more secure in their interactions with us. 
 
And that is worth changing for.


1 November 2012