Understanding your wealth
Our first step at Global Planning is to assess where you are now. The more we know about your wealth circumstances, the better we can serve you. Building up a comprehensive picture of your wealth situation helps us see where the gaps are, where you might be over-exposed to risk, and make sure that no appropriate opportunities are missed.
It also means we can take a closer look at how you think about your wealth. In our experience, clients intuitively group their assets into three categories:
Personal Holdings - you can think of these as assets that maintain your lifestyle. Examples include transactional cash reserves, your main residence or collection of fine art.
Investment Portfolio - this is a diversified selection of assets designed for long-term growth while taking an appropriate degree of risk.
Opportunistic Investments - these are usually concentrated-risk assets in which people have strong convictions or expertise (e.g. your own business), or unrelated concentrated tactical holdings. Often these holdings are associated with who you are, or what you do, and may be aimed at your aspirational need to move to the next level of wealth.
Many people invest too much in Personal Holdings and Opportunistic Investments (driven by emotion or conviction) and not enough in their Investment Portfolio (based on discipline and rationality). For example, holding more of your wealth than you need in cash outside your Investment Portfolio means you miss out on opportunities to grow your wealth over the long term.
On the other hand, over-concentration in Opportunistic Investments may leave you too exposed to isolated risks. Understanding why certain investments are important to you personally helps us to realize what you really want from your wealth. We can then suggest ways to rebalance your investments across the three categories, in order to manage your assets efficiently.
Understanding your financial personality
Traditionally, investment advisors were mainly interested in finding out where you stood on the scale of Risk Tolerance; whether you are "conservative," "moderate" or "aggressive." Investors would then be prescribed set portfolios accordingly.
By contrast, our approach aims to create a high resolution picture of you as a multi-faceted, financially-aware individual with a complex mix of attitudes, goals and aspirations. Risk Tolerance is crucially important - the most appropriate long-term investment strategy aims to maximize your potential returns in line with the amount of risk you are willing to accept - but there is much more to investment attitudes than that.
At Global Planning, we use a unique tool - the Financial Personality Assessment (FPA) - that enables us to build a highly detailed profile of your preferences and attitudes. This innovative approach enables us to take portfolio planning to a new level, utilizing insights from leading thinkers in finance and psychology.
Using the FPA, we measure six key dimensions that, in combination, reveal how you think and feel about wealth and investments. The results of the FPA help you clearly understand the basis of our investment recommendations and provide context regarding how you make financial decisions.
While responding to the questionnaire is optional, it only takes a few minutes to complete and allows us very quickly to understand multiple aspects of your financial personality in a robust, objective and scientific manner. Three of the six key factors reflect your attitude to risk; the other three reveal how you make investment decisions.
Because we can then understand your attitudes to investment in detail, we can then reflect these in your portfolio. As part of your Wealth Review, we will also look at other essential components of your investment profile, such as your overall time horizon, income requirements, liquidity profile and tax situation. All these will affect how we manage your portfolio, and which services we offer, in order to provide a mix of wealth management services that's appropriate for you. The best solution depends upon both who you are and what you want your wealth to achieve.