There are some basic points that all investors need to be aware of when agreeing to a long term  wealth management relationship. The most important things you need to have a basic understanding of are the following. Investors need to understand the fundamental nature of assets (cash, fixed interest investments and equities), their risks and how their risks change over time and, to make their decisions based on these facts. Otherwise they will not be able to make an accurate assessment of their attitude to risk. They need to be aware of the risks of long term depletion of capital and how this risk can be managed. Most investors will end up depleting investment capital to some degree to meet their financial needs. If the advisor is not addressing these risks, then there may well be cause for concern. If the advisor cannot address these risks, then there is more than just cause for concern. In order to safely manage risk and return, managers of your financial security will need to either manage or at least know the disposition of all assets and financial needs over time. Everybody wants more return to less return, more security of capital to less security of capital and more certainty of return to less certainty of return? Unfortunately, if you want to out perform the market, or have less risk than the market, or have more income than the market, you need to accept the risks associated with these demands. Anybody who wants to out perform must have the discipline to accept the guaranteed risk of under performance. Investors therefore need to understand the risks they can stomach and the type of investor they are. There are in fact three key risks that an investor has to understand before they can make a decision about the portfolio structure and investment strategy most suited to them. The financial services industry tends to focus primarily on one risk when assessing an investor’s aversion to risk. The industry has a poor record in personalising portfolios to meet financial needs over time and managing the risks to the ability of assets to meet needs irrespective of market and economic risks. This is a central issue in the financial services industry. TAMRIS calls this the portfolio problem. Conflicts of interest exist at every level of the wealth and asset management process. Some are obvious such as being remunerated by commission while others are subtle but no less important. The financial services industry is in general poorly educated over the fundamentals of investment and the construction, planning and management of portfolios. Most education is directed towards delivering the financial service’s industry’s products and solutions. The level of education provided is reflected in the simple maxims and messages that investors are fed to ease the investment decision.
The above does not represent all the information that you will need to assess or understand in your wealth management relationship. Basic information on what a share, a fixed interest investment, a mutual fund or an Exchange Traded Fund is should be provided by your wealth manager. However, you can access this information through the internet, through the library, through newspapers and magazines. This information is everywhere and this document does not deal with this information. The facts provided in this section deal primarily with areas that are not overtly discussed by the industry in general, for one reason or another. Managers who do address these issues represent those better able to manage investor needs and assets.
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