S2 Ep. 40 - Invest Like A Private Wealth Manager with Kevin Doran

Investment Uncut

This week we speak to MD and CIO at Wealth Manager AJ Bell, Kevin Doran. We discuss Kevin’s guiding principles in investing and what’s worked well / less well over the years. Investment decision making – groupthink etc. Kevin has seen big changes and discusses what he’s most focusing on over the next few months. Guiding principles: the single most important thing is acknowledging that time is your friend in investing but costs are your foe. Beyond that there is no magic formula other than consistency over time. A private wealth manager is a unique and privileged position at managing one of an individual’s most important things (their money). As an industry we haven’t always done a good job on transparency, letting people know what they are invested in and why. The single biggest problem these days is the 24 hour news channels, as a consequence of that there’s “news from noise”. Stocks don’t go up and down – they surge and plummet. If you can get the big stuff right, time will do the rest for you. What has Kevin put in place to help clients get this right? On the Youinvest platform they aim to cater to three different personas: Confident and in control – looking to implement their ideas as efficiently as possible. Might buy direct securities; Hungry for Help – build own portfolios of funds, perhaps using starter portfolios; Nervous Newcomer – will buy a product of funds. It needs to be easy to understand, jargon-free educational materials. During lockdown seen a surge in the Hungry for Help and Nervous Newcomer profiles on the site. Over last 4 years focused on ability to build portfolios, not just look at funds. Biggest lessons over Kevin’s career? Make sure you get the biggest things right – don’t focus on small stuff eg the difference between a Fed hike in November vs December Easy to spend too much time talking No point in talking around things the market has already discounted – can be very impressive and interesting, but much is already baked into expectations Starting point has to be – what’s already in expectations Can only add value to portfolios if you can identify things that are not already incorporated into prices Understanding where change is coming from and what the catalysts are This implies the need to be more widely read beyond macro variables, history, philosophy, psychology It’s about understanding people as much as anything. History and politics alongside economics For example: currency analysis - There is lots of analysis done over recent decades but really most of what mattered was 3 key events from the perspective of a UK investor. AJ Bell was trying to deliver low cost value solutions: aiming to strip as much cost out as possible without sacrificing the basics. Don’t do “final mile” research in order to keep costs in the chain low. Instead outsource this to fund managers. When looking at hire/fire manager decisions – look at qualitative data first, backed up by quantitative data. For example blending factor styles and philosophies, managers are doing what you expect given the style, it is not just the highest performing. A good starting point is to try and guide to clients that if underlying investors can’t invest over a cycle then shouldn’t be investing (define a cycle as 5-6 years). When looking at decision making, ensure you have built a team with wide ranging interests and views, encourage openness and honesty. For example, the Brexit debate – there were a good range of opinions, outside with what you would get in most asset management businesses.