Solutions Behavioural Investing
A fresh – behavioural - perspective on Risk
The way we define and mitigate risk can positively impact investor behaviour
Historically, the traditional approach would be to classify investors into a portfolio type according to their risk profile. There is nothing wrong with this approach, but some investors have more complex needs and require an approach that better aligns with how they think and behave.
Investment loss can lead to value destructive behaviour.
When investors experience a portfolio loss outside of their expectations, the shock of this can evoke a visceral reaction and set off a chain of behaviours that destroy value in their portfolios.
Expert Insights
Joining the dots between a client’s goals and their investments
“When you construct different portfolios aligned to different goals, its easier for clients to understand why they own the assets they do, and why they are taking the amount of risk they are. They can more easily join the dots between those things and their end goals which can help them avoid surprises” – Dan Miles
Goal based Investing
Our goals-based investing framework is about working with the ebb and flow of how investors think and act and giving them the tools to not only feel more comfortable with their investment strategy but to also mitigate key risks they may face in achieving their goals.
Our Three-bucket Approach
Safety Bucket
Maslowian/ behavioural portfolio theory
Psychological and safety needs/ safety layer
Types of Goals
Short term goals, regular and essential spending needs to maintain minimum standard of living
Lifestyle Bucket
Maslowian/ behavioural portfolio theory
Love and esteem needs/ specific layer
Types of Goals
Medium term goals, regular but not essential spending needs (for example regular holidays)
Future bucket
Maslowian/ behavioural portfolio theory
Self actualisation/ shot at richness
Types of Goals
Long term spending needs, aspirational goals, considered nice to haves.
Adviser tools to solve new era problems
Our portfolio solution and bucketing strategy lets you build an investment strategy that matches your clients’ objectives.
Our stochastic modelling web application gives you the ability to showcase a range of possible outcomes and the likelihood of your client meeting their goals.
This allows you to offer a new approach for those clients that are vulnerable to sequencing risk and longevity risk. A goals-based approach means tailoring risk to your client’s goals to avoid drawing down on growth assets at an inopportune time, and taking on additional risk for those longer-term goals.
A different approach to portfolio construction
Our risk defined portfolios are constructed to align with our goals-based investing framework. They offer a more dynamic and adaptive approach to risk benchmarking. Portfolio risk is defined and strictly controlled, but our asset allocation can fluctuate more broadly, with less constraints than a traditional approach.
The three portfolios we offer align with our three-bucket goals based investing approach. We offer these in two versions, our flagship version which are unconstrained in terms of underlying investments and our fundamental version which are designed to be lower cost.
They were launched in 2017 and have the track record to show that this more adaptable approach to asset management works.
Investment management fee on all portfolios: 0.359%*
*This doesn’t include the fees of any underlying investments, but includes platform RE fees.
Lifestyle Preservation
Managed Account
Flagship Availability
HUB24 & CFS FirstWrap
Fundamental Availability
HUB24 & Netwealth
| Risk | Timeframe | Objective | Fundamental Performance | Flagship Performance |
|---|---|---|---|---|
| Max loss -5% Max volatility 3% | 5 Years | RBA cash + 1.5% | HUB24 CFS First Wrap | HUB24 Netwealth |
Wealth Creation
Managed Account
Flagship Availability
HUB24 & CFS FirstWrap
Fundamental Availability
HUB24 & Netwealth
| Risk | Timeframe | Objective | Fundamental Performance | Flagship Performance |
|---|---|---|---|---|
| Max loss -15% Max volatility 8% | 7 Years | RBA cash + 3% | HUB24 CFS First Wrap | HUB24 Netwealth |
Aspiration
Managed Account
Flagship Availability
HUB24 & CFS FirstWrap
Fundamental Availability
HUB24 & Netwealth
| Risk | Timeframe | Objective | Fundamental Performance | Flagship Performance |
|---|---|---|---|---|
| Max loss -40% Max volatility 15% | 10 Years | RBA cash + 5% | HUB24 CFS First Wrap | HUB24 Netwealth |
We have a Superior (4 & ¼ star) rating with SQM research
Please get in contact to request a full copy of the report.
SQM Research Disclaimer
The rating contained in this document is issued by SQM Research Pty Ltd ABN 93 122 592 036 AFSL 421913.
SQM Research is an investment research firm that undertakes research on investment products exclusively for its wholesale clients, utilising a proprietary review and star rating system. The SQM Research star rating system is of a general nature and does not take into account the particular circumstances or needs of any specific person. The rating may be subject to change at any time. Only licensed financial advisers may use the SQM Research star rating system in determining whether an investment is appropriate to a person’s particular circumstances or needs.
You should read the product disclosure statement and consult a licensed financial adviser before making an investment decision in relation to this investment product. SQM Research receives a fee from the Fund Manager for the research and rating of the managed investment scheme.
For a copy of the full SQM research report on our risk defined portfolios please contact us and request a copy here.
