Guide will help advisers build ‘holy grail’ of portfolios

Cass Business School has drawn up a blueprint to help financial advisers build the ‘holy grail’ of investment portfolios, the guide’s co-author and the school’s professor of asset management Andrew Clare has announced.

“There is a clear need for ‘joined up’ thinking that straddles the four parts of any advised solution: financial planning, risk profiling, portfolio construction and fund selection”, Mr Clare said.

He said the guide, produced by experts at the school, which is part of City University London, was designed to help financial advisers create “transparent” and “responsible” multi-asset investment strategies for investors with all levels of risk appetite.

Article continues after advert

Steve Thomas, professor of finance at Cass, said: “Our blueprint focuses on simple, rule-driven portfolio construction principles which minimise the needs for heroic, and usually wrong, forecasting assumptions and opaque complexity.

“The benefit of our approach is that outcomes should be more consistent with a client’s aims where they seek to minimise maximum losses.”

The two academics laid out their approach in a newly-published two-page white paper, A Centralised Investment Process: Joined Up Investment Thinking.

The authors called for the clear separation of a client’s attitude to risk from a client’s capacity to withstand a fall in their investment.

Adviser View

Matthew Bird, financial adviser at Gwent-based Seer-Green Financial Planning, said: “I like the idea that there is a guide to refer to, and risk profiling is a useful tool, but there is also a need for flexibility as people’s needs and appetite for risk fluctuate all the time.

“A large part of an adviser’s job is to explain investments, risk and market volatility, so you do need a system in place for general advice, but the market is moving, so it is good to have flexibility.”