Outcome based investing

This article is part of
Discretionary Fund Management - October 2013

Delivering clients’ long-term financial goals is the clear focus at OCM Wealth Management. Where recent investment and growth has sealed the firm’s position as one of the largest Chartered Independent Financial Advisory (IFA) and Discretionary Fund Management (DFM) firms in the county, with a growing national reputation. They are fast becoming the DFM of choice, for modern financial planners, due to their integrated IFA / FA solution.

Founded 10 years ago by CEO Jason Stather-Lodge, the company prides itself on offering a connected IFA / DFM client solution. According to Jason “if you are an IFA working hard to determine what annualised return a client needs to deliver their planned dreams; you need an investment solution which is focussed on achieving that specific outcome. We have created, and spent the last decade refining, this exact solution; putting the client’s first, and in doing so we have been successful across all market conditions”

OCM’s priorities when managing client’s assets are:-

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1. To deliver the client agreed annualised return, or outcome

2. To protect capital in line with indicative acceptable levels of loss and volatility

3. To beat an agreed benchmark

4. To beat the market return

OCM call this strategy Outcome Based Investing (OBI) and what makes OBI different is that it focusses on delivering what the client’s need, with regards to the annualised return; truly connecting the advisors and clients plan with an investment strategy.

OCM are different because instead of putting a client into one portfolio, based on traditional risk profiling, they integrate their own risk profiling and advising techniques into partner firms. As a result they blend clients across model portfolios based upon the lead advisers’ direction, considering the outcome required and acceptable risk tolerances

OCM make decisions based on their interpretation of: future risk, charting, momentum, economic analysis, volatility and required returns, which they call Quantamental Analysis. The result is a conviction led decision, based upon expected future returns and volatility on varying time horizons, being 3, 6 and 12 months.

OCM has a range of portfolios. Each has a specific focus for outcome and acceptable indicative capital losses or price volatility. Therefore if OCM believe risk is off and volatility is low, they will invest a client in a more aggressive portfolio. If risk is on and volatility high they will secure profits and invest a client in a less aggressive portfolio. All portfolios have the ability to go to 0% equity in times of high market risk or uncertainty, to protect value and ensure clients dreams are not obliterated by being focussed on the wrong priority.

OCM Centralised Investment Proposition

OBI is a Centralised Investment Process that challenges the assumption of Modern Portfolio Theory; that you cannot make strategically timed asset allocation decisions, and that all investors are better off buying and holding a fixed portfolio of assets, rebalanced at fixed points.

The view at OCM is that you can make strategic allocation decisions, by cyclically adjusting the asset allocation model, not necessarily timing the markets, but ensuring that the client is in the right asset at the right time. This is true of stockbroking and true of asset management so you should use both active and passive styles and blend different managers as the economic environment moves through its phases.