Consumer Letter
Last update: January 6, 2025
To support consumers in questioning an investment firm about its investment policy, industry organisations for investment firms have prepared the following Consumer Letter.
What questions should you ask about the investment policy?
An important part of an investment firm's service is its investment policy. By asking questions about the investment policy, you gain a clear picture of an investment firm's approach. This allows you to assess whether this policy suits you, as one investment policy is not the same as another.
What questions should you definitely ask your account manager, relationship manager, wealth advisor or manager to get a good understanding of an investment firm's investment policy?
1. On what investment beliefs does the investment firm base its services?
What principles form the basis for the investment policy and the structure of the organisation's investment process? What distinguishes the investment policy from that of others?
2. What approach, investment strategy or investment style does the investment firm use?
For example, does the investment firm use models, fundamental or technical analysis, quantitative analysis or market sentiment? Where in the service are active choices made? What choices are these? How does the investment firm ensure that the investment strategy is consistently implemented?
3. In which investment categories, sectors, regions and (types of) financial instruments does the firm invest?
Are there specific categories, products and/or (types of) instruments that are or are not traded/invested in? On what is this choice based?
4. For advice or management of the entire portfolio: How is the portfolio constructed?
Are there limitations in the construction of the portfolio? How are these established and measured? How does the investment firm arrive at a certain ratio between investment categories in the long term (strategic asset allocation)? What freedom does the firm have for short-term policy (tactical asset allocation)? What is the policy for hedging foreign currencies and using borrowed money?
5. Regarding statements about expected returns and risks: How does the investment firm arrive at these expectations?
How does the investment firm balance return, risk and costs? How do expectations influence the investment decisions of the investment firm? Which risk measures are used?
6. How can you, as a (potential) client, evaluate the investment policy of the investment firm?
What benchmarks should you as a client use to assess the investment policy and investment results? And over what period (horizon) is an assessment of the policy and results meaningful?