Investment Advice and Planning: Current Situation & Profile - Module 1.2 Investor Experience and Goals

1.      Investment Timeframe – when will the investor need access to the funds invested as this will determine the type of investments selected. Are the funds needed immediately or in a month’s time or in 2 to 3 years’ time or in 5 to 7 years or in 7 to 10 or more years. As we determine the timeframe(s) we start to identify the amount of funds to be allocated across each selected investment. In the selection process we move to the next part in meeting the investors goals through diversification.

2.      Diversification – can be a combination of both direct and indirect investing and include various currencies (though it is always wise to keep investments predominately in what I call your cost or expense-based currency). With diversification one objective is to flatten out the volatility of a portfolio of investments and reduce risk while utilizing investment timeframes to achieve results over time. Another important facet of diversification is the blending of investment styles (a particular quality found in managed investment portfolios and to be covered in more detail in future articles as well as details on Alternative Investments) that determines how the underlying investments are selected to create a managed portfolio and to exploit the seasonal nature in the performance of different types of investments and investment management styles. It is important to note that with all investments it is “Time in, not Timing” that provides the best potentially performance and return when investing which leads us to managing an investors expectation.

3.      Expectations – managing an investors expectation can be a challenge depending on their investment experience and the goals they wish to achieve. It is important to be open and straight forward with an investor after they have outlined their goals and as investments are identified and selected as to both the upside and the downside (risk / reward) of each investment and how it belongs in a portfolio relative to the investor’s goals.

In many cases an investor will generally fall into one or two categories’ i.e., wealth creation and / or retirement funding. The key point as to which category they predominately fall under will usually be based on their age. Regardless of the category an investor falls under it is important to realize that at some point a goal may shift as circumstances change over time whether personal, political, economic, environmental or a combination of these and other events. 

Communication on an ongoing basis with an investor becomes an essential part of how an advisor maintains and builds both the relationship with the investor and sustainability of their business which is covered in Module 4 “Cost / Benefit”.

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