At the end of October 2023, the owner of the business I had helped build told me he had sold it to AFH.
Since then, I think I have been on two different journeys.
The first has been around the sale itself, consolidation and my own internal debate about the rights and wrongs of what happened. I could probably write a lot about that, but increasingly I think the wider debate around consolidation in financial services is more important than my individual experience.
The second journey is perhaps more interesting.
It is about how my thinking has changed.
Looking Back
I spent 13 years helping to build a financial planning business.
We moved from being part of a network to becoming directly authorised. I built and managed the investment portfolios and was responsible for much of the client communication.
Looking back, I would estimate that around 70% of my time was spent on investments.
For much of that period, the portfolios performed very strongly relative to their benchmarks.
The final 18 months were much harder.
That experience matters because success can reinforce your belief that the way you are doing something is the right way.
Sometimes it is.
Sometimes the environment simply suits what you are doing.
The last three years have given me time to reflect on that.
As I have started researching funds, investment strategies and propositions again, I find myself looking at things differently.
We All Have Biases
There will always be someone telling you that their way of investing is better.
Active is better than passive.
Passive is better than active.
Investment trusts are better.
Managed funds are better.
One investment house has found the answer that everybody else has missed.
I am increasingly uncomfortable with absolute statements.
My thinking has shifted.
I believe the best investment solution depends on the proposition the financial planning firm is trying to deliver and the clients it is trying to serve.
That means being prepared to challenge our own views.
We shouldn't become trapped by our biases.
Humility is an enormous strength in investing.
Being prepared to say perhaps there is another way of looking at this is not weakness. It is part of good governance.
Managed Funds, Multi-Asset and MPS
In the 1990s we often called them managed funds.
Today we talk about multi-asset funds, model portfolios and MPS strategies.
The terminology has changed, but the important questions remain remarkably similar.
What is the strategy trying to achieve?
How is the portfolio actually built?
What drives returns?
When would we expect it to perform well?
Just as importantly, when might it struggle?
Those questions matter far more to me than whether something carries a particular label.
There may also be times when combining different approaches makes sense.
Not for the sake of complexity, but because different strategies can behave differently in different market environments.
Active Versus Passive
I am deliberately not going too far into the active versus passive debate.
I spent many years managing portfolios of active funds, so I know that good active managers can be found.
I also recognise the benefits that low-cost passive investing can bring.
For me, the important point is the same as it is with managed funds.
Do the research.
Understand what you own.
Understand why you own it.
And understand the circumstances in which it might disappoint you.
An investment solution should not simply be judged by what worked over the last five or ten years.
It should be judged by whether you understand how it is likely to behave in the future.
Perhaps This Is the Biggest Lesson
When I look back, I don't think a financial planning firm should be spending 70% of its time on investments.
Financial planning? Perhaps.
Understanding clients? Absolutely.
Helping people make good decisions? Definitely.
But investments should support the financial planning proposition, not dominate it.
That doesn't mean investment research is unimportant.
Quite the opposite.
If a firm is going to outsource investment management, use multi-asset funds, adopt an MPS or build its own portfolios, it needs to understand what it is putting in front of clients.
What is it designed to do?
When should it perform?
When might it underperform?
What risks are being taken?
And does it still fit the proposition the firm has built?
The journey is unlikely to be straight.
Mine certainly hasn't been.
But perhaps that is the point.
Experience should change how we think.
The danger comes when experience simply confirms what we already wanted to believe.
Remain curious.
Keep challenging your thinking.
And, particularly when it comes to investing, remain humble.
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