In a world where investment products are numerous and often convoluted, Evans & Partners will always favour the simple over the complex. Before presenting an investment idea or product to our clients, we ask ourselves whether there is a more transparent, cost-effective, tax-effective, lower risk or more liquid way of achieving the desired outcome. For many in our industry, this question is now rarely raised. Too often, the “value” of a particular investment product or service is not assessed by the quality of the underlying investment thesis but on the basis of the profit margin which that product will generate for the manufacturer or distributor.
At Evans & Partners, we sell our advice and experience. We embrace financial innovation that allows us to enhance returns and identify/control risk in a transparent and cost-efficient manner. At the risk of being boring, we will always look for, and promote, the simplest investment solution for each individual client. We believe that the following factors are integral to this goal.
We pride ourselves on providing an appropriate diversification across a range of asset classes. The bull market never ends, it just changes asset classes! Over the long term, asset allocation is the simplest and cheapest way to manage market volatility, protect against the unknown and preserve your capital. As such:
- A primary investment objective which aims to generate returns that outpace inflation over the long term.
- We see little reason why investors with a balanced investment portfolio, and a long term horizon, should be buying high-fee products that offer capital protection and/or an absolute performance objective.
- Appropriate portfolio construction. Portfolios need to be populated in a manner that is consistent with a client’s overall risk/return objective as defined by the strategic asset allocation benchmark.
- Tax-effective investment solutions. Ultimately, investment performance can only be assessed on a post-tax, post-fee basis. Given the range of tax environments available to investors in Australia, we believe it is critical that our advice is sensitive to after-tax outcomes, particularly with respect to the management of Australian equity portfolios where we have access to the fully franked dividend (a beautiful thing!).
- Cost-effective investment solutions. While investment expertise, wisdom and tailored advice is a valuable service, investment performance – defined as return per unit of risk – should be assessed on a post-fee (and post-tax) basis and relative to the post-fee performance available from an index fund or leaving your money in cash. We believe that within the burgeoning universe of fee-heavy investment products/strategies the majority are found wanting when assessed on this basis – particularly over a long term time horizon.
- Investment solutions that place a value on liquidity (i.e. easy and timely access to your money should it be required). We believe if you invest in an illiquid security, an illiquid investment structure (e.g. a unit trust with monthly or quarterly redemptions), a fixed term (e.g. a 3 year structured product) or an investment strategy with a long-dated pay-off profile (e.g. private equity); you need to be well compensated (post fees) for the lack of liquidity. Our investment advice takes this into account.
- Investment solutions that place a high value on income generation. Regardless of the asset class, income will always be the primary driver of long term investment performance. Living standards in retirement can only be protected by growing income streams (that outpace inflation) – this goal is always central to the investment advice we provide our clients.
The relationship between a corporate entity and the provision of advice to private investors is inherently problematic. One is governed by economies of scale, client segmentation, product pipelines, a fixation with high margin investment solutions and an ongoing battle with internal conflicts. The other is governed by a desire to treat all clients equally (to the extent the prevailing regulatory environment permits), a lasting personal relationship, a desire to educate and investment solutions that are determined by what’s right for the individual and not what delivers the highest return on assets.
Our investment philosophy is distinctive because we have recognized, and hopefully contained, the contradictions which arise from trying to be both a rational corporation and a genuine provider of wealth management services. As others befuddle with complexity and jargon, we advocate transparency, simplicity and plenty of two-way communication.