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Financial Happenings Blog
Sunday, April 13 2008

Investment philosophy and performance is one of many important aspects for people to consider before signing up to work with a financial advisor.  However, the choice of investments should not be the first consideration to be made.

The first task a good financial planner should be doing is ensuring that a client is achieveing any relatively "risk-free" savings such as the reduction of tax and access to government payments.  From here, once a decision has been made to invest, the next step a financial advisor should be taking is to ensure that the asset allocation across a client's entire portfolio is suitable in relation to their income needs and risk tolerance.  Only then is it time to help clients choose the relevant investments that should be used in order to maximise the returns from the particular asset allocation that has been defined as necessary.  In the same instance advisors should also be identifying the best method of purchasing those investments to minimise costs and risks.  Once all these decisions have been implemented a financial advisor should be following up with regular and relevant reviews.

The service "A CLear Direction Financial Planning" offers clients exactly follows that path:  strategy first, then asset allocation then investments and how to invest followed up by regular reviews.

All this being said, investment strategy and performance is important.  We build investment portfolios for clients based on the best available academic research.  Take a look at our Building Portfolios page for more details.  In our view, this research compels us to use the three factor model developed by Fama and French.  In Australia, the most effective method of investing using this model is through trusts implemented by Dimensional Fund Advisors (  We do not receive any form of commission or payment from Dimensional for using their trusts.  We use them because they provide the returns clients are entitled to from share markets.

However, academic theory is nothing if it can not be implemented and provide the returns that are promised by the research.  Therefore we want to provide the historical returns of the funds that we use to build investment portfolios.  They clearly show the existence of the risk premiums (small, value and emerging markets) that the research tells us should exist.  Please click on the following link to be taken to a list of graphs - Dimensional Fund Performance Graphs.

Scott Keefer

Posted by: Scott Keefer AT 07:29 pm   |  Permalink   |  Email
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