People with large sums of money to invest should expect personalised, individual treatment. And that is what true private portfolio management is all about, writes Wlodek Bogucki, chief investment manager at Standard Trust.
Many investment advisers describe their products as "private portfolio management", but do not in fact provide such a service, instead they offer nothing more than fund management.
Since you are paying a fee, you are effectively employing the investment manager. Consequently, you have the right to demand a service beyond that of mere fund management. In terms of fund management, the client's personality is not taken into account: you are one of many nameless units, all dealt with in the same way, without individual attention to particular situations, needs and personalities. The essence of private portfolio management, on the other hand, is that management of the portfolio is driven by the client's mandate, rather than in terms of a general model portfolio.
In selecting someone to manage a portfolio of shares, investors traditionally consider two factors - performance, and cost. But the third - probably the most important - matter is ignored: the investment philosophy of both the institution and of the investment manager. If you understand that philosophy, you are likely to develop a personal relationship with your investment manager, which is what private portfolio management is really all about. The growth of this partnership between yourself and your investment manager creates an environment conducive to regular, ongoing contact. Since there is no third party between you and your private portfolio manager, your relationship develops unfettered. The two investment personalities - yours and that of the portfolio manager - must be merged and accommodated, so that there is a sharing of investment values between the client and the portfolio manager. Feeling comfortable with the investment philosophy on offer, secure in the knowledge that your point of view will be accommodated, is your right - it's what you are paying for.
Identifying your investment mandate and personality, your particular needs and preferences, necessitates communication with our investment manager. The South African investor is generally unaccustomed to expressing this, and needs encouragement.
Also make sure that you articulate your expectations regarding tax. Many private individuals with a portfolio of shares assume that it is tax-free because the income is dividend-based. But, if shares are frequently purchased and sold, the taxman might well classify you as a share-dealer and tax you on the profits. Many portfolio managers follow this quick buy-and-sell route, in order to reflect high returns but, at the same time, they are exposing their clients to a tax risk. The intimate relationship between client and investment manager should put you at ease in making clear your position regarding tax.
In addition to tax, use your investment manager for guidance about other matters. Your adviser knows about all sorts of investment opportunities - offshore, property, asset swaps. Whether or not you give instructions in this regard, the fee you pay is for investment assistance, so you have every right to seek the adviser's opinion on other issues.
To justify the word "private" in private portfolio management there should be a growing personal partnership between client and investment manager, who together fashion an investment strategy reflecting the distinct needs of the client. Before you choose someone to manage your share portfolio, make sure that person and the organisation he or she represents understand and uphold this interpretation of the concept of private portfolio management.