After having worked very briefly as a tied agent commission-based financial advisor (ex promotore finanziario) on behalf of a bank group for a very short time about 20 years ago, I realized that I didn’t feel comfortable working on a commission basis, and that most of all, I felt uncomfortable with underlying conflicts of interest involved. I had to advise insurance policies and mutual funds in order to get commissions, and many other alternatives couldn’t be taken into consideration. An investor who has a portfolio invested only in insurance policies and mutual funds and not also invested in stocks, bonds or precious metals, should ask why and whether opportunities are not being overlooked.
Any successful relationship demands a profound sense of personal compatibility. This implies a clear understanding of goals and objectives and a mutual appreciation for common and permanent values:
- I seek to avoid all conflicts of interest and work only in the client’s interests.
- I give clear advice given and involve the client in the investing strategy. There is the constant aim in avoiding permanent loss.
- I help the client understand that wealth creation comes in spurts and not in the tidy logic which is often sold to the public. Great opportunities come only rarely and the investor must prepare beforehand to take advantage of them when they arrive
- I do not advise financial engineered or structured products such as certificates as they are generally illiquid and generally not necessary.
- • I am rarely totally bullish or totally bearish: there are always sectors to be bearish on and others to be bullish on.
- I help my client understand alternative investments such as precious metals.
- Give impartial assistance in understanding planning tools such as pension funds, insurance policies and investment trusts.
- I help my clients understand the real hidden market risks and dynamics ahead of time.
- I try to give my clients serenity by offering independent investment advice, and not sales pitches.
- I share the aim with my client of growing my client’s wealth while preparing for hidden potential risks, with no conflicts of interest.
I have been among the first to offer fee-only independent financial advice on the Italian market, having started in 2004, 14 years before the creation of the official register in 2018 (L’Albo Unico dei Consulenti Finanziari). I only use independent financial research, and aim to identify hidden risks which are often ignored and questioning too-obvious conclusions to be found often on the media and on the internet.
To receive further information, examples of my newsletters, or if you would like to fix a free introductory appointment, please contact me and I will get back to you.
Though the starting point is a goals-based investing approach, the choice of the single investments composing the portfolio is based on a contrarian approach with a dynamic management style. Today most investors are focused on volatility, and there is an extreme request for volatility compression, which has created a bubble in search for low-volatility financial products. I believed that volatility must be managed, not compressed, and that it is necessary to take into consideration other factors, such as: liquidity conditions and liquidability of the investment, long term inflation and interest rate dynamics. Today the world is emerging from a 40-year cycle of disinflation, and we may be embarking on a new long term cycle of increasing inflation. In the past, long term cycles of rising inflation were generally accompanied by the implementation of capital controls and by measures aiming at the repression of interest rate below the rising inflation rate: success in such an environment will require portfolio strategies which are completely different from the strategies which have had success in the last decades, as the historical correlation between bond and stock prices changes drastically.
Most of all, to obtain success with a financial plan in the long term, it’s often critical to avoid risks which are not yet evident. When a risk is evident, it’s generally too late. The key to success often resides in identifying and avoiding hidden risks which are highly probable but not yet evident, which implies "second-order thinking", noticing anomalies even the crowd seems to not notice anything strange at all.
To quote the Harvard Business Review: "The clearest signal that a novel risk is emerging is anomalies—things that just don’t make sense. This sounds obvious, but most anomalies are difficult for people to recognize… Recognizing a novel risk requires people to suppress their instincts, question their assumptions, and think deeply about the situation”.
One important hidden risk today is the illiquidity combined with excess diversification. Many investments have a hidden illiquidity: many investments which normally easy to liquidate may become illiquid during a crisis; this is particularly true for structured investments like investment certificates. Also, many balanced portfolios are often over-diversified in too many investment funds which then invest in correlated markets. A portfolio which is invested in an extreme number of mutual funds and ETFs and not in single stocks and bonds, may be over exposed to correlated indexes, but most importantly, may become difficult to modify in a very short time and with very low costs when the market risk changes in a short time period. One must consider also that many undervalued investments are not necessarily represented by main market indexes: there is often good value to be found among such investments. That is why not only funds and ETFs must be taken into consideration, but also single stocks and bonds as well as real investments such as commodities and precious metals. Though financial planning is the starting point for long term goals, short- term market shocks can drastically reduce the value of assets, especially in the case of liquidity shocks. When potential risks become too high, it may be a prudent to liquidate some investments, stay in cash and await the next opportunity, to reduce risk and protect the value of the portfolio. Doing this should be relatively simple and not costly.
Another hidden risk present today is the mania for controlled volatility financial products. Volatility should be managed, not artificially compressed through the use of structured products, which may create only an illusion of safety. Today liquidity risk is just as important as managing volatility: many structured products become illiquid during market downturns. I always aim to advise investments taking in account such risks.
A diversified portfolio must not mean a blocked portfolio. Even though the starting point is goals-based investing, and the time horizon must always be long term, liquidity shocks may go great damage to the portfolio short term, and so it is sometime necessary to manage these risks by occasionally reducing investments and raising cash: there are moments in which this is the only protection.
Investing the portfolio in stocks and bonds as well as ETFs, can raise the tax efficiency of the portfolio. Under Italian tax laws, eventual losses and gains can be fully compensated when investing in stocks and bonds, while this is not always fully possible when investing only in investment funds or ETFs.
My approach to financial planning consists of 5 phases:
- Analysis of the initial investment situation and experience
- Definition of the client’s life goals and division of assets in function of each goal
- Analysis of the client’s risk profile & definition of the investment strategy
- Creation and management of the investment portfolio
- Sending the list of purchase and sale orders to the client for implementation in the bank of his or her choice.
The combination independent financial advice & stock/bond/gold portfolio, compared to the combination commission based tied agent financial advice & mutual funds, generally results in lower costs with the former.
Legal protection of the investment portfolio: trusts and inheritance planning
I help clients understand, during the financial planning process, if they need or don’t need to affront inheritance planning, pension planning, or to consider tools such as trusts, and affront these needs with a team of specialized professionals when necessary.
As provided for by Italian law, the client has no obligations to pay fees until the contract is signed. I always offer a first introductory appointment with no costs or constraints by phone, so that the client clear any doubts he may have before deciding.