Any examination of business or investment literature reveals the importance of differentiation. Why would people choose you over a competitor if you're the same as everyone else?
Today, the need for financial advisers to be different has never been greater. Or urgent.
In troublesome economic times and turbulent market conditions, investors need sound advice. The conditions today are unlike anything we've seen in the past three decades, so it stands to reason that the advice would be different to match the need of the times.
We've been reminded recently of the lessons of Howard Marks – a leading investor and advocate of doing things differently. In one of his articles – 'Dare to be Great' - Marks explains:
"If your behaviour and that of your managers is conventional, you're likely to get conventional results – either good or bad. Only if the behaviour is unconventional is your performance likely to be unconventional…and only if the judgements are superior is your performance likely to be above average."
"The consensus opinion of market participants is baked into market prices. Thus, if investors [or investment managers] lack insight that is superior to the average of the people who make up the consensus, they should expect risk-adjusted performance".
The shorter version, he says, is "You can't take the same actions as everyone else and expect to outperform".
Today, the need to be different and use superior judgment is vital and urgent because 'average' will almost certainly mean failure.
The current environment of high-interest rates and high inflation, combined with low productivity, is leading us towards what is likely to be a sustained period of stagflation. It's an environment where bonds and simple equities that make up the vast majority of 'balanced' portfolios are far less likely to perform as they had in the past decade when conditions were the opposite of today.
Two players in the Australian investment scene have been advocating a different approach for precisely this reason: The Future Fund and Dynamic Asset. Both firmly believe that future prospects of success will be built on an understanding of a very different world and, therefore, a very different environment for investors.
Future Fund chairman, Peter Costello, has gone a step further and openly criticised the major super funds for failing to adapt.
The Future Fund and Dynamic Asset believe that being different and exercising superior judgement in the most relevant way for today and tomorrow is the answer. It requires these elements of investment behaviour:
- More diversified portfolios
- More significant allocations to alternatives, including hard assets such as commodities and resources
- Less focus on asset classes and more focus on future asset performance
- More significant allocations to assets that will do better in periods of high inflation
- Less reliance on simple equities and bonds
- Using active portfolio management with Dynamic Asset Allocation that can adapt to periods of crisis and take advantage of opportunities by making allocation shifts in real-time.
The Dynamic Asset Managed Account Solution provides this difference to Australia's financial advisers and their clients. The heart of the solution contains five actively managed portfolios designed for risk-adjusted returns over short, mid and long-term horizons. Blending portfolios using Dynamic Asset's easy-to-use Portfolio Construction Tool enables advisers to build portfolios that match individual client's financial goals and circumstances.
For advisers, it's not only the portfolio management that changes the game. Focusing on individual investor goals and changing circumstances provides a compelling client solution.
Contact us today to learn more about how Dynamic Asset can help your business adapt and thrive.
