One of clients used an aeroplane analogy in describing the management of his investment portfolio.  He considered himself to be a passenger on an aeroplane being flown by the asset manager with my role, as his adviser, as steward.   This is a great analogy, although I think he may have the role-players wrong, but let’s first discuss the investment process to understand the analogy better.

Typically a client consults with an investment adviser in respect of investing an amount of money to achieve a specific objective.  The adviser then recommends a suitable investment to provide for the objective of the investor.   The investment is managed by an asset manager in accordance with a mandate governing the risk and return requirements.   The adviser is responsibile for the ongoing review of the investment to ensure the asset manager achieves the returns required in order to satisfy the investor’s objective.  Any change in the investor’s objective would need to be taken into account by the adviser to ensure the investment mandate is still appropriate.

So if we go back to the analogy I don’t agree that your adviser is simply a steward on your journey.   I see the adviser as that of the “Tower” with the client as the “Pilot” and the asset manager as the “Aeroplane”.    The aeroplane will keep flying and reach its destination most times; it is usually pilot error, which results in the accident.    Just the same the only time an investor will lose money on a well-considered appropriately allocated investment is when they panic and crystalize a paper-loss during market volatility.  When a plane enters a storm and loses visibility it is the Tower who guides the pilot to safety.

The trick is talking to the right “Tower”.  You get two types of advisers, those that don’t know and those that don’t know that they don’t know; beware the latter.

 

Mark Williams
Mcomm, CFP®, HdipTax
T. 021-851 3746
E. service@synfin.co.za

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Who’s flying the aeroplane?
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