Two words that strikes fear into most. Or maybe just bewilderment.
Both of which are by products of a lack of understanding. And this lack of understanding causes stress.
And we know that the majority of illnesses begin with stress, that is itself derived from financial concerns. Which is why we work so hard to remove the confusion, provide clarity – and remove the stress.
We understand our clients are not financial experts themselves, otherwise, they would not need us.
The Principals of LSM have close to 65 years of experience in the markets and understand fully the importance of properly aligning a client’s objectives and aspirations with their attitude to risk.
It is only when there is a mismatch between expectation and reality that problems occur.
There is absolutely no need to accept any risk in your portfolio that you are not entirely happy with.
In fact, many of our clients select a no-risk approach to investing. The difference is – they do not sacrifice sensible growth in doing so. It can be done.
At LSM we have the knowledge, skills, and expertise to craft an investment model for you that will get you where you want to be – but without any nasty surprises along the way.
We apologise if you expected to find lots of technical jargon, market views, and information on the next best thing.
Maybe later… but first..
What we have learnt over our decades in this business is that clients rarely pick up the phone to thank their adviser for producing good investment performance. But they are very quick to do so if things do not go as planned. And understandably so.
This is not a happy experience for either party – so we spent a long time analysing how to remove such an eventuality from both parties’ concerns.
And actually – it is really simple.
Our research shows that the vast majority of complaints are due to underperformance or having been misled about what returns the client might get. So really, it is about managing expectations and total transparency.
Most people are aware of a thing called “attitude to risk”. Any decent adviser will discuss this at length with his client to ensure that the investment recommendations match the client’s ATR.
So, if a client expects a 20% return per annum, but is a low-risk investor – then he is going to be extremely disappointed. Or misled.
A careful analysis of what you can reasonably expect is of absolute importance. A very high-risk investor might well get 20% per annum – but conversely, he might also lose it all.
And this is fine so long as the client accepts that and fully understands the risks involved. Needless to say, most do not, so the process of managing expectations begins.
How about 10%? Still high risk, but very possible over time – given that time dilutes the effects of market volatility.
Which brings us to another acronym that we use here at LSM. This is CFL or capacity for loss.
And it is different from ATR. Whereas ATR is a subjective view on how much risk one is prepared to accept in pursuing one’s objectives, CFL looks at how much capital you are prepared to lose along the way if circumstances work against you (i.e. market crash due to Covid).
And whilst Covid was unexpected, the concept of CFL should not be, especially in your planning.
By conducting a careful analysis of your ATR and combining this with your CFL – we can effectively remove nasty surprises and prevent those uncomfortable telephone calls when things do not do as planned.
Because your expectations will have been managed and your investments will match what can reasonably be expected.
And we should be clear here. As professional advisers – it makes no difference to us if a client is a high or low risk. Being blunt, we earn the same either way. We are truly independent in this.
Why then, are the majority of client complaints performance related?
It is because the adviser fails to manage expectations or chooses not to in order to attract a wavering client with unrealistic promises that do not accurately predict what might happen. And it is in situations like this that things go wrong.
At LSM we would rather not have that awkward telephone call. Simple, like we said earlier.
Transparency, honesty, accuracy. It really works.
If you would like to learn more about how we work with our clients, or how we remove stock market risk from our client’s portfolios, contact us now!