Briefings

Get access to our Exclusive Content

Scroll down for our briefing notes on a number of key financial planning topics. Although this is exclusive content, it is free to register for and download.

Latest Thought Leadership Downloads

Case Study – helping business owners achieve their objectives
Pensions – Last Chance Saloon
Dividend Tax Change + Profit Extraction
Pension Benefits in the new regime
ISA or Pension

You must be Logged In to view this content.

Use the options below to either login or register.

REGISTER

Blog

Order! Order!

David Crozier

Part of Navigator’s Personal CFO service is that we meet with clients on a regular basis, to discuss the progress they are making towards achieving the things that are most important to them. Last week, John Sloan, one of my … Continued

Unto my wife, my second best bed

David Crozier

Recently, I met with a solicitor to discuss some company-related legal matters. As I got up to go, and as we concluded the ‘Doing anything nice at the weekend?’ chat, I mentioned, almost in passing, that I thought my wife … Continued

Predictions are very difficult, especially about the future

David Crozier

Yet again, the unthinkable has happened and we are faced with political uncertainty at a very difficult time for the UK. Not only are there challenges at home from extremist terrorism and a crumbling health service (to name but two), … Continued

You are the company you keep

David Crozier

A couple of weeks ago, I was in Amsterdam for a meeting of the EBIS group.  The EBIS (Evidence Based Investment Solutions) group are a collection of like-minded financial planning businesses from around the UK. The purpose of our meetings … Continued

Media

Two key lessons you can learn from academic research on investing

How to Win the Loser's Game: Full Version

Wayfinder: Pre-retirees

Wayfinder: Retirees

Core Beliefs and Code of Ethics

Navigator’s core beliefs

Navigator have certainly got to know me in great detail, and in a sympathetic way – they’ve taken the trouble to understand my future hopes and plans. 

Consultant, law firm

Here are the key beliefs that we bring to financial planning, both in the initial stage and over time:

  • We provide financial planning for fees, never for commission.  This eliminates conflicts of interest that cloud objectivity.
  • We incorporate all aspects of financial planning as we evaluate your situation: retirement, investment, estate, tax, education, insurance, charitable, business and life goal planning.
  • The beginning of our process focuses on helping you discover and document your specific and unique strengths, weaknesses, opportunities and threats. It is critical to formulate your vision of your future lifestyle; your desires and aspirations as well as your basic needs.
  • To create your Plan, it is necessary to test this vision against your current reality, in an utterly honest way. Truly understanding the gaps between the two helps identify planning strategies that can best align your current assets and future financial decisions with your vision for the future.
  • It is critical to review and measure your progress continually and regularly.  Your plan will certainly evolve, and may change dramatically, over the years.  A financial plan is always a work-in-progress, never a finished document.

Code of ethics

  • As one of only three Accredited Financial Planning Firms in Northern Ireland, our obligations towards our clients and the industry are summed up in the IFP’s code of ethics.
  • This isn’t a box-ticking exercise; we take our commitments to being an ethical practice extremely seriously. If you ever feel that we have failed to live up to the standards set in the code of ethics, please get in touch.

Navigator’s values

On an even more fundamental level, our values should be evident in everything do. These are the things we will never compromise on.

Navigator will always…

  • Behave with integrity
  • Put clients’ interests first
  • Keep looking for better ways

To re-emphasise, if you ever feel that we have failed to live up to these standards we have set ourselves, please get in touch.

Investment Philosophy

As a client, I can see that Navigator approach investment in an entirely professional way – not just in their dealings with me, but also with the investment providers. They really do fight my corner.

– Partner, law firm

Here are the five core beliefs we bring to investment:

  • Markets work.  The prices for financial assets find equilibrium quickly.  There are only very limited and rare opportunities to “beat the market.”
  • Risk and return are inextricably related.  Aiming for higher returns involves accepting higher risks.
  • Diversification is always essential.  A huge body of academic work shows that it not only reduces short-term volatility, but also increases long-term returns.
  • Asset allocation explains (nearly all) performance.  In plain English, putting your money to work in the right markets will do much more to deliver good returns than trying to seek out individual high-flying stocks.
  • Costs and taxes matter.  Back in the high-flying years of the last century, when markets often rose by, say 20% p.a., it didn’t much matter whether a fund manager charged 1.25% or 1.5% in management fees.  In this lower-growth era, it makes a big and important difference.

The fact is, much – probably most – of the investment value Navigator can add comes from sticking to these five core principles.


Investing v Speculating

There are two moments in a man’s life when he should not speculate: the first is when he does not have the means, the second is when he does.

– Mark Twain

As financial planners, Navigator’s role is to help you to manage the relationship between the risk of your portfolio and the amount of money you need to invest to achieve your objectives. It therefore goes without saying the more successful your investment experience is the happier you will be with your planning in general. In the past, putting faith in fund managers to use their expertise to deliver the desired returns seemed like the right thing to do. Indeed the fantastic returns of the 1980s and 1990s masked what was really going on in a client’s portfolio.

Clients and advisers became accustomed to returns well in excess of 10% on a regular basis and so very few of them cared, although most were unaware, that the charges and expenses on these funds were often 2% or 3% per annum. Today’s economic landscape is considerably different to those heady days, and investment returns are returning to their long term average. This means that they are predicted to be in single figures. Therefore, if inflation is likely to be steady at 2% or 3% and the charges amount to 2% or 3%, you will need returns in excess of 6% just to stand still! This could lead you to believe that it is even more important therefore to pick a highly skilled fund manager to pursue the best results possible.

The overwhelming academic evidence would suggest this is the wrong strategy and that exactly the opposite would be more productive. Three important studies into the factors determining a portfolio’s return concluded that on average 94% of the variability in returns was explainable because of the asset allocation. Only 4% was down to the fund manager selecting the right stocks and 2% was down to “timing” the market correctly. The problem is not necessarily that fund managers are unskilled. In fact, the opposite is true. There are now so many highly skilled fund managers deploying so much highly focused technology that in order to consistently ‘beat’ the market, a fund manager must consistently ‘beat’ all the other equally skilled professionals who, as a group, are the market. This is an insurmountable challenge.

There are two kinds of investor, be they large or small: those who don’t know where the market is headed, and those who don’t know that they don’t know. Then again, there is a third type of investor – the investment professional, who indeed knows that he or she doesn’t know, but whose livelihood depends upon appearing to know.

– William Bernstein

The reality is that no one can consistently predict the future. Therefore fund managers invest in the sectors and companies that they think will do best. Despite the fact that they spend vast sums on researching the same companies they often reach considerably different conclusions from the same data. This means they are infact speculating. In addition their objective is to outperform their peer group and therefore they will change their strategy and stock selection constantly in the pursuit of this goal. This can do great harm to your portfolio as it threatens one of the key principals of investing, which is diversification. It also ruins any hope that you and your planner had of achieving a stable asset allocation, which as mentioned earlier explains 94% of a portfolios performance.

The good news is that there is an alternative strategy. For years institutions and the rest of the world, particularly the US, have been taking advantage of Modern Portfolio Theory (MPT). At the heart of MPT is the conviction that asset allocation is the major determining factor of a portfolio’s returns. It is crucial to the achievement of your objectives that your planner sets the asset allocation and chooses asset class funds to populate your portfolio.

  • Only you and your planner will know the risk tolerance that you wish to apply across your portfolio.
  • Only you and your planner will know the growth rate required to achieve your objectives.
  • A fund manager will construct an asset allocation to achieve the fund’s objectives not yours.
  • To achieve outperformance they must speculate on the future.
  • Diversifying with different fund managers only increases the mutation of your asset allocation.

The further good news is that not only should a properly constructed asset allocation lead to a more successful and less stressed investment experience, it should also cost you a lot less. One of the reasons that you may not have heard of this before is that many of the funds used to construct a proper asset allocation are known as “asset class” funds and are passively managed. One of the reasons they cost less is that they often pay little or no commission.

Your choice is simple: you could construct a huge roulette wheel of the hundreds of active fund managers out there and “gamble” which one will have predicted the right firms, in the right sectors, in the right markets, at the right time and do it consistently every year. Alternatively you could simply take advantage of the vast amounts of academic research that has won Nobel Prizes, costs less and is bespoke to your individual requirements.

Our view is that casinos are for gambling not your future prosperity.

 

Costs of Fund Management

We believe that investors are in great danger of generating more wealth for fund managers than they do for themselves.

Between 1980 and 2005 the US stock market averaged a return of 12.5% per annum. Over the same time, the average mutual fund (unit trust in UK-speak) returned only 10%, because of the cost of fund management.

The annual difference compounded over time makes a huge difference. Over those 25 years, an investment in the S&P 500 starting at $10,000 would have grown to $170,800; the same money in the hypothetical average fund would only have achieved $98,200 – a difference of almost 74%!

Costs and taxes matter – enormously – and we believe in using low-cost index and passive funds where possible, so that the maximum possible return from each asset class accrues to our investor clients.

 

Effects of inflation

The costs of goods and servicing is continually rising. This means that, when you are planning for a future financial event, you need to take into account the effects of inflation.

The investment returns quoted in the media are “nominal” returns; that is, it’s the actual rate at which the investment performed. Nominal returns are all very well when comparing different investments, but when considering the longer term, they are not much use at all. For that, we use “real” returns.

Real investment returns are the nominal returns less inflation. For past performance, that’s easy enough to do – simply subtract the historic figure for inflation, which is publicly available on Government and many financial websites.

For the purposes of future financial planning, it important to deduct an estimate for inflation. Failure to do this will result in a huge underestimation of the amount of money needed to arrive at your financial objectives.