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Investment Portfolio Management – an adviser case study: Paradigm Norton

  • By Jason Stockwell

Managing clients’ investments by putting clients’ needs first – Steven Williams, Financial Planner at Paradigm Norton

The process of investment portfolio management without a clear understanding of a client’s specific goals is a bit like running a race in the Olympics without being told what distance you’re running. You hear the words “On you marks; get set; GO!” The gun goes off, but if you don’t know whether you’re running the 100 metres, the 10K or the marathon, you have no idea how to pace yourself, or how close you are to the finish line.

The Paradigm Norton investment philosophy is rooted in the achievement of a client’s broader life goals. As the late Dr. Stephen R. Covey was so famous for highlighting, this means that we start the whole process with the end in sight. Before any investing happens, we help our clients to consider what they want out of life. Once we’ve got a clear direction on this, in turn, it leads us to the detail we need in order to determine what investment return is required to be achieved from their portfolio, in order for them to see the goals that they have articulated become a reality. With a deep understanding of their short, medium and long-term goals both from a personal and financial perspective, we can develop a flexible plan with suitable investment solutions, all at low cost.

As financial professionals will know, risk and return go hand in hand. You cannot expect to increase the value of your client’s capital over the long-term without taking market risk. We weigh up our client’s risk appetite with the knowledge that diversification is key. The most important decision when developing a client’s investment portfolio is the selection and mix of assets within it. Global diversification is the best way to broaden your client’s investment universe and reduce volatility.

Minimising investment cost and maximising tax efficiency is vital for long-term investment success. At Paradigm Norton, we make sure that our clients understand this and the benefits (or disadvantages) of compounding. We all know the dramatic effect compounding can have on investment returns and it’s one that’s not always obvious or transparent to clients. Most active funds fail to outperform the market simply because of their high management costs which can heavily impact returns over the long-term. As a result, active management is not an investment approach we employ for the majority of client portfolios.

The most important decision when developing a client’s investment portfolio is the selection and mix of assets within it

Our investment strategies use very low-cost market return funds to make up the majority of our equity exposure. To increase diversification and provide the potential for increased returns, we then tilt the portfolios towards small company and value stocks, both of which have been proven to have diversification benefits when added to market return funds. They have also been proven to out-perform large company and growth stocks over the long term. However, as with all past performance this cannot be guaranteed. Indeed, since the 2008 financial crisis, while smaller companies have outperformed larger companies, value companies have not outperformed growth companies.

Armed with this information we create investment portfolios based around our client’s broader life goals. Our role is to explain how their investments work and manage clients’ expectations. No one should expect future long-term returns to be significantly higher or lower than long-term historical returns for various assets classes. It’s a discipline to maintain a long-term view as inevitably there will be times when portfolio performance is hard to endure.

Our Investment Committee

Paradigm Norton has built a highly experienced group of talented investment professionals, with a wide range of skills, to provide guidance and oversight of our investment approach and ensure that our approach continues to remain fit for purpose on an ongoing basis.

The internal expertise of the Investment Committee is augmented using a highly experienced external investment expert, who not only provides an external and challenging perspective, but also asks the awkward questions that may otherwise be missed!

The existence and work of this committee not only ensures our investment approach is both comprehensive and regularly reviewed, but also demonstrates our continuing desire to deliver leading-edge investment solutions to our clients. The committee helps to ensure Paradigm Norton remains current and that our approach to investment portfolio management, asset allocation and risk is being applied fairly and consistently

The unexpected happens and that’s why, at Paradigm Norton, we help our clients plan, not just for the here and now but FOR LIFE.

About Steven Williams

Steve is a Chartered Financial Planner and Fellow of the Personal Finance Society. He is an expert in investments and a key member of the Paradigm Norton Investment Committee. Steve works with a diverse range of clients at different life stages of their financial journey. He has a depth of experience working with these clients to identify their aspirations and shape their financial goals to achieve their dreams through the process of financial planning.

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