I asked Carolyn why Bloomsbury advocates evidence-based investing for its clients. Here’s her response:
Following an evidence-based investment approach means that rather than expending huge amounts of time trying to “beat the market” we can instead devote that time to serving our clients and creating real value for them.
We tend to find that our clients face a lot of the same issues. Consequently, over the years we have built up a tremendous amount of experience in helping our clients to deal with those issues en route to achieving their lifetime goals.
Here are some of the issues that our clients have identified as adding the most value for them:
- Allowing clients to focus on those aspects of their life which matter most to them in the knowledge that their financial situation is under control and need not absorb their continual attention;
- Helping clients to understand how much they can spend each year without running out of money before they run out of life;
- Helping clients to answer the question, “What investment return do I need to achieve my goals and is that consistent with the risk I am willing and able to take?”, using a lifetime cash flow forecast to help them to determine how much they might, for example, need to realise from the sale of a business to meet the cost of their lifetime goals;
- Helping clients to determine when they will be able to choose to work as opposed to it being necessary;
- Helping clients to simplify their finances and consequently reduce their stress;
- Helping clients to minimise the tax that they or their children will pay, if that is important to them;
- Helping clients to avoid financial surprises;
- Helping clients to leave their children enough to do something, but not enough to do nothing;
- Protecting clients from investment ‘opportunities’ which can sound fantastic on paper but which often contain hidden risks;
- Acting as an independent third party sounding board to help clients to evaluate alternative options.
To which, I would add the following: Giving clients expected returns likely to beat 90% or more of professionally managed money.
Resource of the Week
This blog by Carolyn Gowen has valuable insights into investor behavior.
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