When is the right time to delegate investment decision making

An increasing number of ANZ’s self-directed investor clients are choosing to delegate day-to-day portfolio decisions. We examine what’s motivating them, why it’s important to get the timing right and what’s involved in handing over the reins.

Hands-on investment management brings many pleasures. It may be the thrill of discovering an undervalued asset, the gratification of having your positions pay off and the satisfaction of gaining deeper market insight.

Yet, what’s rewarding at one stage of life may become a burden at another. So, when hands-on investment management is no longer a good fit for you, using an investment manager may become the better option.

We have identified seven reasons why some of our clients are choosing to delegate day-to-day investment decision making to ANZ Private:

1. Competing priorities
2. Key person risk
3. The desire to separate personal wealth from business assets
4. Investment risk complexity
5. Investment access
6. Transition to next generation
7. Declining health

1. Competing priorities

Investment idea generation, decision making and execution all take time, effort and attention – each in limited supply. Some clients prefer allocating this time to their business, career, family, travel or other goals like managing their philanthropic interests. Choosing to delegate day-to-day investment management can allow them to expand their capacity for other priorities.

Imagine an example of Priya.^disclaimerPriya, a highly skilled cardiologist works diligently over many years to build a reputation for excellence, resulting in a growing patient base and recognition in the medical community. She also takes time to focus on her personal wealth through self-directed investing. Yet, as her workload grows, she has little time to manage her personal investments effectively.

Priya delegates her investments to ANZ Private, allowing her investment decisions to be managed by experts who could provide the necessary time, resources and strategic insight. Priya benefits from a managed investment portfolio and reduced stress.

2. Key person risk

Some client families become concerned they’re placing too much reliance on one key family member. This ‘key person risk’ can grow when the family’s investment portfolio is large and complex.

It’s important that the key person has enough support around them so they can step away from time-to-time – without neglecting the investment portfolio. ANZ Private can put in place measures to ensure continuity and consistency. Engaging an impartial professional investment manager can also validate decisions made – helping avoid family tension.

3. The desire to separate personal wealth from business assets

As the value of a client’s business grows, it may come to represent a disproportionate volume of their total wealth, creating an uncomfortable level of risk.

Imagine^disclaimer an entrepreneur, Andrew, who founded a rapidly growing Software as a Service (SaaS) company. Over time, the firm’s valuation increases as its revenue grows and Andrew takes on more employees. While his wealth grows on paper, Andrew’s personal wealth is tied up in the business, creating a need for a risk mitigation strategy.

Andrew seeks the assistance of ANZ Private to professionally invest the growing stream of dividends from his company in a way that diversifies his wealth, manages risk and enhances his financial security. This would enable Andrew to dedicate his full attention to the continued growth and success of his company, confident that his broader financial future was in safe hands.

4. Investment risk complexity

Investment uncertainty and market risk are becoming increasingly difficult to manage. Thorny geopolitical conflicts feed short-term market volatility. Unease about climate change is leading to unexpected capital allocation. Nations are burdened by high levels of public debt.^disclaimer

In response, many clients are setting up stronger risk management frameworks – drawing on professional assistance to do so.

Market complexity is also shining the spotlight on investment governance gaps. These include the need for more timely financial performance measurement and reporting and sharper performance attribution.

What’s more, heightened cybercrime means that cyber security controls need to be strengthened. Professional investment managers can help defray these risks with access to global research and platforms that an individual may otherwise struggle to access.

5. Investment access

We’re seeing an uptick in client interest in private market products due to their diversification and performance benefits.^disclaimer

Such investments, which are typically unlisted, may include local and international private equity, private debt and infrastructure. These investments have traditionally been unavailable to personal investors due to high investment minimums, poor liquidity and distribution limitations. However, ANZ Private’s institutional strength and capability can help open the door to private market products. Investing in these types of assets requires a high level of professional expertise, which clients are comfortable drawing on.

6. Transition to next generation

More clients are integrating their wealth management strategies with their intergenerational wealth transfer objectives. They’re setting up comprehensive wealth transition plans to pass assets to younger family members.

However, the next generation often lacks investment expertise. That’s why professional investment managers can play a critical role – putting guardrails in place and helping to upskill younger custodians, especially when the transition happens sooner than expected. A professional investment manager can also help alleviate tensions that may arise within blended families. This may allow the patriarch or matriarch’s wishes to be at the core of decisions. 

7. Declining health

At some point, many clients find their health makes it difficult to give their investments the time, effort and attention needed. By bringing in professional investment managers, these clients are able to focus on their personal health and wellbeing. They can take comfort that their poor health won’t put pressure on their family members – who could otherwise find themselves ill equipped and legally unable to steward the management of the family’s wealth.

The importance of delegating before you need to

Choosing when to hand over day-to-day investment decision making to a professional investment manager is difficult – it’s rarely too early, but it can be too late.

If you’re sensing the risks and effort to personally manage your investments are outweighing the benefits, now could be the time to start handing over the reins.

Some investments are easy to delegate. For others, unwinding positions can take time and expertise. Seasonally sensitive investments like residential property, may require advance planning to optimise sale prices.^disclaimer

If your assets are in the superannuation system, such as a self-managed super fund (SMSF), there are additional obligations to meet. Overlooking these could lead to penalties. You need to make sure, for example, that any wind-up complies with the SMSF's trust deed and superannuation laws.^disclaimer

It helps to structure a transition to professional management over time, especially as there may be substantial tax issues to navigate. That’s why it’s important to explore your options early, so your wealth will be capably managed – even if you no longer want to do it yourself.^disclaimer

If you’re not a client of ANZ Private, or use only some of our services, now could be the time to explore our investment management capabilities.