Combining PA With Professional Approach

When I talk to clients in the City, I often encounter people who don’t have to make investment decisions as part of their job but become interested in the subject and end up running their own "personal account" investment portfolios. The bull market often validates this strategy and draws in additional funds. The only "cost" in this bull market is the time and effort involved in making more decisions with more money. In such an environment, financial advisor involvement may seem like a redundant, unnecessary burden.

However, there are several ways in which a financial advisor can add value, even for those who enjoy managing their own investments:

How a Financial Advisor Can Help

• Aligning Investments with Personal Circumstances: Personal account investments are often driven by individual investment cases—focusing on market opportunities, trends, or thematic plays—without fully considering the investor’s personal circumstances. Factors such as tax efficiency, time horizons, liquidity needs, overall risk exposure, and estate planning may not always be incorporated into decision-making. A financial advisor takes a comprehensive approach to integrate investment decisions with personal financial planning, ensuring that the strategy is not only market-relevant but also optimally structured to support long-term financial goals.

• Complementing & Diversifying Personal Strategies: A financial advisor can introduce a “belt and braces” approach through a Core-Satellite Strategy.

• Providing an Alternative Point of View: Having an independent perspective can challenge biases, help manage risk, and refine long-term strategies, ensuring decisions aren’t driven solely by market momentum or overconfidence.

Understanding the Core-Satellite Strategy

The Core-Satellite Strategy is a way to balance personal investing interests with a structured, risk-managed approach. It involves splitting investments into two distinct parts:

1. Core: The foundation of the portfolio, consisting of well-diversified, professionally managed investments designed for long-term stability and efficiency. The core is typically composed of broad market exposure, such as diversified funds or portfolios aligned with an investor’s risk tolerance and objectives. This segment helps ensure consistent, long-term growth while minimizing the impact of market volatility.

   
   

2. Satellite: This portion represents a more flexible, active investment approach. It allows clients to allocate a smaller percentage of their portfolio (e.g., 10-30%) to individual stocks, thematic funds, sector-focused ETFs, or alternative assets that align with their personal market insights, investment theses, or even speculative interests. The satellite provides room for higher-risk, high-conviction bets without jeopardizing overall financial security.

Short-Term vs. Long-Term Investment Approaches

One of the key differences between personal account investing and professionally managed portfolios is the investment horizon. Many clients in the City tend to focus on short- to intermediate-term opportunities, seeking gains within months or a few years, often influenced by market trends, macroeconomic events, or sector rotations. While this approach can be rewarding in a bull market, it often exposes portfolios to concentration risk, lack of diversification, and the challenge of timing the market correctly.

By contrast, a diversified, discretionary-managed portfolio takes a longer-term approach, optimizing returns over full market cycles while incorporating risk management, asset allocation strategies, and continuous professional oversight. These portfolios are designed to compound wealth steadily, mitigate downside risks, and offer greater tax efficiency—benefits that shorter-term, actively managed personal accounts may struggle to achieve consistently.

Why This Approach Works

• Stability & Risk Management: The core ensures a structured, risk-adjusted strategy that serves as a financial safety net.

• Flexibility & Personalization: The satellite portion allows clients to actively engage with the markets and pursue higher-risk opportunities.

• Behavioral Discipline: By having a dedicated core, clients can avoid excessive trading, emotional decision-making, and overexposure to speculative bets.

Take the Next Step

If you're a finance professional managing your own personal account investments, it may be worth considering how to refine and future-proof your strategy.

• If you're thinking of a health check on your current investment approach, an independent review could highlight risks or opportunities you may have overlooked.

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• If you're considering adopting a hybrid approach, blending personal conviction with a structured, risk-managed portfolio, professional guidance can help you implement this effectively.

Feel free to get in touch to discuss how to complement your current strategy with a long-term, diversified investment approach tailored to your objectives.