Managing Client Portfolios is not just about ATR
it’s ALL ABOUT ATR
When a client agrees their attitude to risk,
they expect their investment to perform within a defined volatility range.
undisclosed risks that affect performance
will be on you
THE SIGNIFICANCE OF CURRENCY HEDGING:
When are clients subjected to currency risk?
Whenever they are invested in a globally diversified portfolio
Whenever they own assets denominated in a currency other than GBP
What is the risk to the portfolio?
Returns are driven from the currency markets, not from the asset allocation
Strategy upon which portfolio is marketed can be made redundant
Volatility of portfolio becomes mis-aligned with client’s ATR profile
What is the risk to the client?
They are subjected to the movements in currency markets when they are not expecting it
May subsequently see themselves losing money when expecting to make gains (or vice versa)
They are subjected to unexpected levels of volatility
May be experiencing ‘Risk Profile 8’ volatility when recommended a ‘Risk Profile 5’ portfolio
The risk to you – the Adviser
If you do not comprehensively explain currency risk
when recommending a global portfolio…
YOU EXPOSE YOURSELF AND YOUR BUSINESS TO LEGAL ACTION ON ANY OF THE FOLLOWING GROUNDS:
Poor advice regarding the driver of a client’s returns
Poor advice regarding the volatility a client is exposed to
Complaints in relation to both of the above
and there is:
No defence for insuciently explaining the risks at the outset
No defence for failing to match a portfolio to a client’s needs
No defence for not monitoring the ongoing volatility of a portfolio
This is a real and present danger
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THE BENEFITS OF OUR PROPOSITION
The administrative burden of running model portfolios
The compliance burden of conducting portfolio re-balances on an advisory basis
The investment management burden of running your own portfolios
so you can look after your own ROI:
Reduce your risk of client complaints. Organise your client bank. Increase your valuation.
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