I enjoyed watching this summer’s Olympic Games coverage as it was an opportunity to see sports that are not normally broadcast. Thinking back to PE as a kid, it seems that if all the Olympic sports had been an option, everyone would have found one they were good at.
So what is the difference between the people who naturally have the right attributes and predisposition for an event and the competing Olympians? What we hear in interviews and commentary is that ‘process’, ‘discipline’ and ‘measurements’ supersede the more nebulous idea of ‘talent’.
It is easy to translate this recipe for success to mainstream retail investment solutions, particularly in the context of the FCA’s retail strategy, Consumer Duty and the regulator’s Conduct of Business Sourcebook.
There isn’t an Olympic rule that says you must have a repeatable process, be disciplined, manage your resources or measure your performance – it’s just that the winners who are interviewed all do this. As a kid, I might imagine I just need to run, cycle, swim or row as fast as I possibly can and then race against everyone else and see if I win. As we all know, the real world isn’t like that.
The same applies to risk-targeted, risk-managed or risk-profiled retail investment solutions; the benefit to the consumer, adviser and fund manager is far more than just meeting the regulatory requirements.
A simple outcome of discipline and controls is they make you do things that in the moment you don’t want to do – in the interest of long-term success.
For an Olympian, that might mean turning down a few beers with an old mate, getting up at 5am to train or holding back until the final straight. In a fund, it might mean investing less in the risky new thing you’re excited about, selling down investments that are doing well in order to rebalance or putting consumer outcome ahead of what the market is telling you.
Aiming high
To examine this question, I will use our own insights and data from 6,950 adviser users, 2,300 firms, 1,650 solutions, 165 managers and thousands of consumers. Broadly, we divide the retail investment market into 10 profiles by ex-ante volatility and each has an example or benchmark asset allocation that is used in the MSCI Dynamic Planner indices. Together, this enables us to surface the following insights.
Read the rest of this article in the September issue of Portfolio Adviser magazine
