How We Manage Assets

In the over 30 years we have been building ProVest into one of the premier financial services firms in the upstate, we are aware that many of our clients still don’t know all that we do, or are capable of doing. This column will be delving into some of these services over the next few newsletters so that you can be informed and be able to take advantage of the ones you may need. The first service we will discuss is the way we manage our portfolios.

Without the knowledge of how we work, most people will naturally think ProVest is just like every other financial services practice. Truthfully, we used to be. Without a process for making sure all client accounts are kept up-to-date, those accounts simply fall through the cracks and many of them become seriously out of date. Without a process for keeping up with all client portfolios, the common way to manage is to leave the portfolio as is until it somehow gets the advisor’s attention. That usually takes place at review time. Because investment styles tend to go in and out of favor at different times, making updates only once a year is usually not enough. If a typical advisor invests his clients in, say, a growth portfolio while growth investments have the momentum, what happens if growth suddenly loses favor? Will the typical advisor have a process for moving all his growth accounts to more conservative portfolios? In most cases, no! Most will have no way of identifying the clients that need to be moved, and no way of efficiently moving their accounts if he does know who they are. I know. I used to be that guy.

How are we different now? Several years ago we started buying our own research. While there is plenty of free research on the internet, we have found that just about all of it comes with an agenda of some type. It may be economic or political, but no matter, we consider it tainted if it has any agenda at all. Our reasoning is that folks who put out agenda driven research will tend to highlight the information that bolsters their position, while discounting the data that disagrees with it. If we want an opinion, we can find it anywhere. If we want pure information that we can use to make our own determinations, we will buy it from a research firm known for giving it to us straight. Next, we use the unbiased research we buy to build our portfolios. That research is broken up into different strategies. Since most of our clients value asset preservation over pure growth, we will combine three or four individual strategies into a model portfolio. Then we will use other strategies to build other models that have different investment objectives. These separate investment models will have differing amounts of growth potential, but they will all put a high priority on reducing potential losses.

But building our own investment models is just the beginning. While the common way is to choose several investments for a client portfolio, then not touch it for a long period of time, we believe in active management. We can, and do, make adjustments to our portfolios at any time. Most of our changes will come at month’s end, but some will be made in the middle of the month. In fact, should we get a signal to get out of the market one morning, we can have every one of them out by the end of that market day. The way we can move the money of so many people so quickly is that each of the investment models we construct is on a platform with our custodian. Then when a client determines he wants, say, our conservative model, we will place his assets on our conservative platform with all our other clients who are on it. Then when we get a signal to trade part of the investments in that model, our trader can make the changes to every client’s account at one time with one click. Most advisors don’t have that ability. They may, however, place their client assets with a company that conducts active management. But then the client has another level of bureaucracy and expense between him and his money. We buy our own research, we build our own models, and we cut out the middle man. We think our way is better.