Clients who have their investments geared towards a specific outcome gain more from the advice process than those focused on ongoing market developments alone, according to discretionary fund manager Thomas Miller Investment (TMI).
TMI head of intermediary business development Matt Lonsdale said this type of client asks more personal questions such as ‘are we fulfilling our mandate?' or ‘are certain developments what we expected?'.
He said: "Investments driven by risk only give half the solution. If you add in return requirement and time horizon you start to get a coordinated plan.
"If you remove the emotion [towards short-term market developments] to a degree you give them room to breathe. They know there is a plan in place," he said.
The industry should be built around the principle that "if you've got money to invest you should get what you want not what you're given", he said, similar to the legal industry which focuses on the outcome of advice.
TMI, a boutique DFM which is looking to expand in the IFA space, has made it its default strategy to look at what investors want to achieve within a certain time.
Lonsdale, who is tasked with developing the firm's intermediary business, said the problem is too often firms get the time horizons wrong, "over-analysing markets on a month by month or quarter by quarter basis".
Markets are quite efficient but they make mistakes, he said. A long-term focus can help iron out short-term changes.
Last week, a group of industry players published a report into how savers think about and respond to risk, which flagged up a ‘reckless conservatism' among savers.
Savers tend to forfeit their long-term saving goals if faced with unexpected situations, instead of thinking about the outcome they are focused on the risk and short term savings, the report found.
Santander Asset Management, which supported the report, head of global multi asset solutions Tom Caddick called for better solutions from fund managers to help advisers focus their clients' attention on meeting their long-term saving goals.
He said at the presentation of the report: "One key takeout [of the report] for us is the reminder that our role is not just to provide a product but it's to help manage expectations to provide a bigger picture for the end client and to help the adviser have better conversations with their client."
Last month Barclays head of behavioural investment philosophy Greg Davies outlined seven insights on how to help clients be better, more consistent investors, including focusing on the long-term.
Advisers who consider outsourcing their investments should first have a clear investment philosophy, argued Fidelity head of UK retail John Clougherty.
Read more on DFMs HERE
Read more from behavioural finance expert Greg Davies HERE
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