Best Practices: Principles for Aligned Investment Advice

After investing capital on behalf of families for decades, we’ve seen market ups and downs, bubbles and trends. Through it all, there are several fundamental principles which inform prudent investing for families. We call them our Principles for Aligned Investment Advice. We believe implementing these best practices is crucial to families and other investors who wish to preserve and grow their wealth enterprise®s to endure across generations. These principles include:

  • Seek public market returns (beta) at low cost, through passive strategies. Though we consider active management in less deep or liquid markets, we believe active managers often fall short of broad market returns;
  • Seek to beat public market returns (alpha) primarily through private, illiquid investments. But, be mindful that not all private investments are created equal, especially when it comes to the timeliness of a particular strategy, fees and expenses, and alignment of the manager with investors;
  • Pay close attention to portfolio asset allocation and re-allocation;
  • Be real about your portfolio, especially with regard to performance – measure returns only after fees and taxes, and the amount of risk you are taking to get a particular return – i.e., volatility;
  • Make sure the interests of client and adviser are as aligned as possible, and in particular that the adviser’s compensation is not linked to the adviser’s investment recommendations.

We discuss how we arrived at these guiding principles in our latest white paper, which is available to download here.