In pre-fight interviews ahead of his bout with Evander Holyfield, former heavyweight champion Mike Tyson once said, “everyone has a plan until they get punched in the mouth.” Over the last several weeks everyone with a portfolio has taken a punch and needs to think about their plan.

At the start of this year not a single analyst or portfolio manager anywhere could have foreseen where the world’s financial markets and the global economy would end up in April. Asset prices everywhere have taken a beating, and even some safe havens have shown more volatility than would normally be associated with that name. 

Whilst it should be a regular process, when crisis hits a review of the principles underlying your plan can actually be a source of comfort. For example, when evaluating investments for inclusion in your clients’ portfolio one approach is to ask three questions:

• How much income does this investment generate?
• How quickly will that rate of income grow?
• What will someone pay for this asset in the future?

After answering those, they need to be considered in the context of a fourth question, what return can an investor get without taking any risk?

Today, the questions remain relevant, but the answers have changed dramatically. 

An Individually Managed Account (IMA) portfolio structure provides the control to quickly adapt to the new reality, the flexibility to tailor dynamic asset allocation decisions, and the transparency to ensure investors understand what they own and why. The result is that investors who better understand their portfolio are more likely to persist with their plan and achieve their desired long-term outcome. 

(To see an example of how the Individually Managed Account structure works in practice, watch our simple Case Study Animation video HERE)

It’s an especially important time for ongoing and genuine collaboration between investor, adviser and portfolio manager. Within the managed account structure, portfolios are aligned to an underlying risk-profile based model, but the individuality afforded with IMAs means there can be significant variability around those models based on individual client circumstances and preferences. 

At Implemented Portfolios we are currently working with some advisers who have opted for now to reduce exposure to risky assets for a select cohort of their clients. At the same time, others are moving to take advantage of the attractive buying opportunities currently available for clients better positioned to see past the current volatility. 

Being able to efficiently reflect these different investor and adviser choices is at the heart of our investment portfolio service. Critically, it means that amongst the many important roles fulfilled by advisers, that when it comes to their clients’ investments, in challenging times such as these they can focus on being good counsellors to their clients rather than administrators.

Increasingly advisers are finding that partnering with the right outsourced portfolio management solution enables them to deepen their client relationships. Supported by effective branded written portfolio commentary and with ready access to in-person or online investment presentations, advisers spend their individual client meetings focused on what is most important to their clients’ long-term financial well-being.

It’s important to remember that a good plan doesn’t have to consider every possibility, but it should be both resilient to market vagaries and volatility, and still flexible enough to respond to whatever circumstances are thrown up, even the inconceivable ones. After all, Evander Holyfield’s plan surely didn’t contemplate having part of his ear bitten off by his opponent in the third round. Yet he went on to win the fight. 

Written by Jon Reilly – Chief Investment Officer, Implemented Portfolios 

To find out more about Individual Managed Accounts, or how Implemented Portfolios partners with financial advice businesses click HERE.

To get in touch with a member of the Implemented Portfolios team, click HERE.