I was reminded this week while reviewing a new client’s previous portfolio of the distinct and different philosophies present in the investment advice business. This is good news for people like me who depend on the fact that I’m not the same as every other advisor, allowing me to be different and attract clients who identify with what I provide. This is also good news for investors who wonder whether there is any real difference between investing on their own, or trying to figure if there’s a difference between advisors who compete for their business. I assure you that the difference is there, and is significant.
The longer I work in this industry, the less I believe that there is one objective “right” way to invest. I used to think that the philosophies and gurus I believed in were “right”, but I think I was getting that confused with “comfortable”. I used to think that investing was merely an objective science, but I think now that it starts first with an artistic approach and personal identification of values and importance. This change in perspective has lead me to better appreciate different styles while at the same time increasing the confidence I feel about my own investing style, advice, and philosophy.
I am very sensitive to diversification. I like to diversify strategies between financial goals and build different portfolios for different pursuits. I like to diversify asset holdings across uncorrelated vehicles. I like to diversify asset managers across different styles (based, again, on their own investment philosophies). I like to diversify tax treatment strategies between investments at risk. I like to diversify the reporting and analysis of economic and financial market performance. I like the complexity of diversification across as many aspects of investing as possible and use it as a guiding principle in delivering my investment advice.
Other advisors have different philosophies and you have your own philosophy, whether or not you know it. The key to a successful investing-advisory relationship is to determine whether the person you hire to advise you on investments (even if that person is you) has a philosophy you can appreciate and identify with. Confidence of conviction is important.
