In this edition of Advisor Insights, we interviewed Keryn Batsilas, a Strategic Financial Advisor from WE Private to understand why and how she uses direct fixed income in her clients' portfolios. Thank you to Keryn for your contribution.
FIIG: What does WE Private specialise in?
Keryn Batsilas: We specialise in providing financial advice to high-net worth individuals, couples, professional women, pre-retirees with SMSFs. Our aim is to provide strategic advice to reach our clients' goals whilst minimising their exposure to investment risk.
FIIG: What is the investment philosophy of WE Private?
KB: Our investment philosophy is to achieve the client goals as established by our in depth Goals and Values meeting with the minimum amount of risk possible. Essentially we are benchmark unaware.
FIIG: How is direct fixed income used within your client portfolios?
KB: Fixed income is used to provide defined income results and create stability in the portfolio.
FIIG: How does it compare to managed funds?
KB: Generally fixed income is more complicated to set up and on average, it requires more capital to achieve a similar level of diversification. It also requires ongoing internal monitoring. The advantages of direct ownership are important - coupon payments are secure and determined and, even if the bond loses value in the short term, we can decide to hold it to maturity for a full return of capital.
FIIG: What kind of questions do clients ask when you first introduce them to bonds?
KB: Usually clients new to the business or new to bonds do not have a great knowledge on bonds, they are misled by the media and the bond bubble hype and are quite averse to having bonds in their portfolio.
FIIG: Do you use cash flow planning and income structuring to form part of your advice and solutions for clients?
KB: Yes - it is an integral part of our advice, we begin by working out the goals of our clients and what they want to achieve, we are then able to work out what income etc they will require and formulate their portfolio accordingly.
FIIG: In your experience, are guaranteed regular income streams a major focus for your retiree clients, or is this a secondary consideration?
KB: This is the major focus of 80% of new clients. We are able to create this for our clients through the use of bonds and dividends.
FIIG: Is preservation of capital becoming more of a core value for clients?
KB: Preservation of capital is front of mind for all our clients, as they are generally approaching retirement and do not want to see what they have worked hard for disappear. Many of our new clients come in adamant that they will not invest in shares or bonds as they perceive them to be risky. Through education we are able to give them comfort that by employing our investment philosophy, we can preserve their capital and work towards providing income to live off in retirement.
FIIG: In our industry there tends to be a number of benchmarks. How does WE Private benchmark each asset class?
KB: We are benchmark unaware - our benchmark is to achieve what the client needs in order to retire safely and comfortably. On average the performance objective range for our clients is between an average of 6% (conservative) and 10% (growth).
From bonds we expect to achieve a 6 - 6.5% p.a. return for our clients.