Your biggest risks are ones your asset manager can’t help you mange.

I recently covered what a fund factsheet tells you about the investment risk you take on when buying funds.

What risk does your asset manager mitigate?

Many investors assume that asset managers handle most of the risk for them.

Nothing could be further from the truth.

Fund managers only manage investment risk—and only within the boundaries you have set for them.

When you pick a fund, you’re effectively giving the asset manager a mandate—a set of rules that dictates how much risk they can take. If you choose the wrong mandate, you could end up with more risk or less risk than you actually want or need.

But the risks you face extend well beyond investment risk.

What other risks do you face?

A fund manager won’t (and can’t) manage:

• • Planning risk – The risk of having the wrong strategy for your goals. Not having enough. Not accounting for inflation properly. Too much reliance on a single outcome. Paying too much tax.

• • Behavioural risk – The risk of making emotional decisions. Doing something silly in the heat of the moment that can derail your plan.

• • Event risk – The risk of unexpected personal events disrupting your plans. Big life events and transitions change your needs. Marriage, divorce, death, injury, hospitalisation.

So, while fund managers play a role, managing your financial future goes far beyond picking the right investments,  funds or asset managers.

What can you do about it?

You can start seeing your FINANCIAL life as being inextricably linked to your REAL life.

As the phrase suggests, your Personal Finances incorporate both personal and financial decisions. 

Having a framework that allows you to incorporate personal finances, financial planning and investment management into a coherent, actionable and measurable process is really beneficial. 

#orderpurposeprogress

Reach out if you have any questions on the above or if you would like help making progress in your financial life.

Email Dominic

Follow White Investments Facebook Page for insights, motivation and sometimes a bit of fun.

This article first appeared in White Investments monthly newsletter. Sign up at the bottom of this page or check out past editions here.