A documented investment philosophy is tool that can help differentiate you from other financial advisors, says Rosemary Smyth, a business coach and founder of Rosemary Smyth & Associates in Victoria.
Your investment philosophy should help clients and prospects understand how you make critical decisions regarding the investment of assets and what kinds of recommendations they can expect from you.
Smyth shares four tips on putting your investment philosophy into words:
1. Define your core beliefs
Your philosophy consists of how you think about the financial markets and how they function, Smyth says.
It should cover your thoughts on the following aspects of investing:
> risk;
> preserving capital;
> rates of return;
> and capital appreciation.
Your investment philosophy document must connect those views with the way you help your clients.
So, if you concentrate your expertise on developing tax-efficient strategies to preserve capital for your clients’ retirement and estate plans, that would be articulated through your investment philosophy.
2. Keep it short
Your investment philosophy should be reader-friendly, simple and expressed in a few sentences. Your vocabulary should be targeted toward your client base.
For example, if your book of clients consists of high-net worth professionals who are experienced investors, you might refer to the way your investment philosophy interacts with the capital markets. If your clients consist mostly of middle-income families, you would use phrases targeted toward their concerns, with the emphasis on long-term saving and moderate-risk investing.
If you want to provide more detail about your investment philosophy, document the steps you take in adhering to your philosophy.
3. Use your own words
While it is often advisable to hire a communications professional to write promotional materials for your practice, Smyth says, your investment philosophy is one project for which you should be writing the copy yourself.
Make sure you have a guiding principle before you start writing. After you have written out your philosophy, you may wish to have a professional writer or editor read it over. But the ideas must be your own. An investment philosophy is not something a marketing expert can copy and paste for you.
4. Incorporate it into your marketing
The advantage to keeping your written philosophy brief is that you can use it in a variety of ways in your marketing plan. It can have a prominent place on your website, newsletters and welcome packages for new clients.
If your investment philosophy statement is short, Smith adds, you can even have it printed on the back of your business card. That is another reason why your philosophy should reflect your long-term view. You don’t want to be replacing business cards and welcomes packages too frequently.
And keep in mind that you need to know and understand your philosophy thoroughly. It is a guiding principle, not a slogan.
“Don’t just write it down once and then forget about it,” Smyth says. “You have to be able to explain it to clients.”