Ray Griffin has anticipated an economic slowdown for the past two years, and as such has practised a moderate approach to investing his clients’ money.
“Basically, what we have been doing for the last 12 months is bringing our portfolios to take profits, and we are directing that to more income-orientated areas, such as more fixed interest in the portfolio in terms of direct mortgage investments,” he says.
“Our portfolio model is based on income, and we know that when markets become unkind in terms of capital growth, we can underpin clients’ overall performance with an income return to them.”
Griffin believes this defensive investment style will be of benefit when the growth rate inevitably drops.
“That moderate approach doesn’t have the very high returns when markets are running high … but when the market turns unkind, we are not as badly wounded,” he says.
“We are not what you would call bullish investors, and we would not want to take our clients out on the extreme, because the clients don’t need the angst and, administratively, when you need to make changes in a hurry you’re not going to be able to enact those very quickly.”
Robert Keavney
Chief investment strategist,
Centric Wealth
Centric Wealth chief investment strategist Robert Keavney will not be making defensive changes to his clients’ portfolios in anticipation of an economic trough, as each plan has been designed to withstand the downside.
“We try to build portfolios to cope with the inevitable fluctuations in economic conditions, so even if we thought the economy was going to slow down, we wouldn’t rush out and make a lot of changes to portfolios,” he says.
“We focus on buying quality assets, and we have a lot of focus on growing income streams.
“The message we give to clients is that asset values fluctuate up and down depending on markets and economic conditions, but the income streams from portfolios are much more stable.”
Keavney says he adopted this approach because he believed it was difficult to accurately predict what the economy was likely to do next.
“There are lots of weaknesses in constantly trying to adapt portfolios to changing conditions — you are wrong half the time and build up transaction costs,” he says.
“We are much more inclined to take a longer term view, and believe our approach is likely to produce very competitive long-term returns.”
Malcolm Phillips
Principal, Financial Services Partners
Malcolm Phillips says he has been reviewing his clients’ portfolios in light of the forthcoming economic slowdown with the aim of making some tactical changes.
“It has been pretty easy over the last couple of years, but when the economy slows you need to be able to protect what you have made over that time, and from that perspective there has got to be a bit of fine-tuning of the portfolios to ensure the downside is limited,” he says.
“We run on an asset allocation model, so we’ve maintained our Australian equities exposure because we want the fully franked income stream coming from that.
“We have already taken profit where we believe it was appropriate and we are now looking to increase our international exposure — we have been doing that over the past 12 months, because we think there is a better prospect for returns offshore than there is here.”
According to Phillips, such an opportunity exists in Asia, where he doesn’t see a slowing down in the near future.
Coupled with the introduction of unlisted property trusts into his clients’ portfolios, Phillips estimates this approach will deliver returns of 10 per cent.
“Our view is that the returns aren’t going to be up around where they were over the last two years, but we still think you will get a reasonable return of around 10 per cent if the portfolio is managed in an appropriate manner,” he says.
“We believe we can generate a 5 per cent income stream, so the growth that we generate doesn’t have to be huge to get to that 10 per cent.”
Paul Barrett
General manager,
Financial Wisdom
Paul Barrett believes advisers should stay true to their long-term allocation strategies, despite the threat of fluctuating economies and changing market conditions.
“The key thing for any financial adviser in times of uncertainty … is to be disciplined and stick to the long range plans they have for their clients,” he says.
“It’s about knowing your client and knowing what they want to achieve … because if their long-term objectives are going to be met by sticking with a particular asset allocation, then why change just because you sense there is a bull run — in those times you need to be disciplined.
“I think it is in uncertain times when you really earn your keep as a financial planner.”
He adds though that advisers should take the time to consider new products when they enter the market.
“There are new innovations in products that could improve your ability to meet the long-term objectives of your client, and you have to contemplate how they affect your traditional view of asset allocations. For example, right now we are looking at the role capital protected portfolios might play in an overall sense.”
