Traveling as you frequently do, you find yourself sitting next to another guy in a suit on a plane for an hour or so.  Chit chat soon turns to, “So, what do you do?”

As someone who works in the investment industry, this can actually be a dreaded question because you know where this conversation almost always leads. “I’m a financial adviser.  I work with investors to help them achieve their long term goals.”

And then, the inevitable follow up, “So what’s your track record?”

It’s hard to explain to someone that this is actually the wrong question to ask.  The fact is, a financial adviser doesn’t have a track record, they have many track records.  This is because they are actually managing many different portfolios  – one (or more) for every client, and each client is different.  Some are in retirement, some are saving.  Some are at their peak earnings, others are approaching it.  Some have just received an inheritance, some have a mortgage.

A financial adviser is a planner first and foremost; they are a portfolio manager only in the sense that they use investments as the means of achieving the goals of a plan.  The investments are a tool, but they are never an end in and of themselves.

The first thing an adviser will do is have an honest conversation with you on exactly what you are trying to accomplish, and how much time you have to get there.  Together, you and the adviser will develop a strategy that is very likely to achieve that objective.  Then, and only then, will an adviser consider a portfolio that is:

1. Likely over the requisite time period to achieve the objective, and

2. Is a fit with the investor’s willingness to go through the vagaries of market gains and losses.

As the sketch below describes, the process starts with goals, which lead to a plan, which then lead to finding investments that fit the plan.    

Why this order?  Because in the scheme of things, investments are probably not all that important, and certainly, track records are dubious guides as well.  An excellent adviser isn’t focused on picking great investments, they are focused on creating great investors.  Great investors invest primarily with their long term goals squarely in mind.  The only track record they are interested in is whether or not they are on course to achieve their goals, and if they’re not, what they should do about it.

As you can see, for a real adviser their approach is goal-focused and planning-driven, rather than based on some attempt to outguess the economy or the markets.  All successful investing involves constantly acting toward the realisation of goals, and all unsuccessful investing is based on reacting to whatever the market happens to be doing at the time, or overanalysing recent track records.

How do you explain that on an airplane?  We’d better work on that one.