Over the past number weeks, I’ve become increasingly concerned about some of the ‘get rich quick’ schemes that I’ve observed being promoted by financial advisers to their clients. On the surface, it appears that many of us haven’t learned anything from the very harsh lessons of the demise of the Celtic Tiger era. In the interest of fairness, I do not think it is appropriate to name specific schemes or investments but, generally speaking, I think you should avoid:
1) Schemes where property developers cannot get bank funding
2) Investments that promise or guarantee returns without risk
3) Advisers/Promoters who promise returns that seem too good to be true
Let’s face it, most investments have gone up over the past few years. Stock markets have seen a steady rise for a number of years. Bonds increased dramatically in the recent past and property has seen a fairly dramatic recovery from very low levels. So it didn’t take an investment genius to invest your money in order to make a decent return in recent times.
However, at Metis Ireland we believe that the benign investment environment of the last few years is changing. Investment returns will become harder to get and, probably, even harder to preserve. Those looking for ‘easy money’ could well find themselves with their investments in tatters. We do not make any apologies if that sounds very negative. Our job is to ensure that our clients are invested in funds/structures that are suited to their investment risk profile and their investment goals. Too often our peers ignore these key considerations in pursuit of the ‘easy money’.
So what can you do, to try to ensure that your money is invested in the most appropriate type of structure?
1) Make sure you invest tax efficiently
This could mean investing in a pension fund as opposed to investing personally. If it’s company funds you are looking at, the company might want to invest in funds to reduce surcharge tax. If you are investing personally and you have accumulated capital losses, then an investment portfolio that is liable to Capital Gains Tax is the one for you.
There is no quick fix here and your financial adviser will need to establish all of your circumstances before advising the best structure for you.
2) Make sure you know your charges and that they are fair value
If we are correct and investment returns will be lower over the short to medium term, then charges will become much more of a focus for the investor. The pension and investment industry is notorious for disguising charges. Make sure you ask for the charges in writing before you commit to your investment and make sure this includes specifics around what the adviser is paid.
At Metis Ireland, there are no grey areas. We always clearly outline the fund managers’ charge and our fees. This is the only way that a successful long-term business arrangement can be sustained.
3) Diversify, diversify, diversify
And then diversify some more! It’s the old cliché of ‘not having all your eggs in the one basket’. In challenging investment environments, diversification helps manage the downside on an investment portfolio. So your investment should have strategies that are exposed to equities, bonds, cash, property and absolute returns.
Your investment should also have a global bias and be invested in the likes of US, European and Emerging Market assets.
In short, we believe that you cannot have enough diversification.
4) Make sure you understand Risk versus Return
This is really important. You need to undertake a comprehensive investment risk profiling exercise with your financial adviser. Then you need to understand what the results mean. This should then dictate the types of investments you opt into. Your investment risk profile should regularly be reviewed and you should always ensure that you are comfortable with the results.
5) Review, review, review
I have yet to see an investment portfolio that doesn’t need some level of tweaking. The changes that are made to a portfolio during reviews can make or break an investment strategy. Whether you feel like it or not, show up for your investment reviews!
If attention to detail and investment expertise are two skills that you feel you need in your financial adviser, you should call Metis Ireland to find out more about our systems and processes.
Co-Founder & Director
Metis Ireland Ltd t/a Metis Ireland is regulated by the Central Bank of Ireland. All content provided in these blog posts is intended for information purposes only and should not be interpreted as financial advice. You should always engage the services of a fully qualified independent financial adviser before entering any financial contract. Metis Ireland Ltd t/a Metis Ireland will not be held responsible for any actions taken as a result of reading these blog posts.