Investment Advisory: Going Deeper Than Just Stock Picks

Reto Stohler, some people think that investment advice is just a series of one-off tips, but LGT’s Portfolio Advisory team offers much more. Can you tell us a bit about that?  

When we bring an idea to a client, it's never just a one-off or something we do in isolation. We always take into account their personal convictions and values, their risk appetite, investment horizon, liquidity needs, overall portfolio, and where they are in life.

An investment tip, on the other hand, is just that: an isolated idea without context. And context is everything. There's no such thing as a one-size-fits-all perfect investment. Our job is to find the investment that's right for the individual - and their broader portfolio.

What kind of investor is Portfolio Advisory designed for?

Typically, advisory clients are financially savvy. They follow the markets, come up with their own investment ideas, and want to act quickly when opportunities arise. Many of them have an entrepreneurial background, so they're used to making decisions.

But when it comes to their investments, they want someone to bounce ideas off - a sparring partner who speaks their language.At the other end of the scale, you have portfolio management mandates, where clients delegate the day-to-day investment decisions to us.

But the lines between these two approaches are becoming increasingly blurred. Many clients now allocate part of their wealth to a portfolio management mandate, which serves as the core of their investment strategy. Around this, they then make complementary individual investments. This is known as the core-satellite approach.

If I were to choose a Portfolio Advisory mandate, how often would I typically speak to an investment expert?

LGT offers three levels of investment advisory. With Advisory Classic, you work directly with your relationship manager and invest primarily in traditional, collective instruments.

With Advisory Expert, investment experts join the conversation alongside your relationship manager. Depending on the complexity of your portfolio, you might speak to your investment expert several times a month. This is especially important if you hold more challenging assets such as single stocks, options, structured products, or private equity and other alternatives in your portfolio.

Our Active Advisory model is designed for clients who want to invest professionally and with a strong focus on trading. It also features access to an investment expert, and if you opt for this model, they will likely contact you several times a week to discuss market developments.

What if I'm away on holiday and markets dive?

We don't execute trades without a client's approval. That's one of the most important distinctions between an advisory mandate and a portfolio management mandate. So we always need to be able to reach our clients - even if they're on the other side of the world. 

So what goes into a typical investment recommendation?

Our experts follow markets very closely. Their insights feed into our Investment Committee, which defines our overall investment strategy - the LGT House View. The House View sets the parameters for investment decisions at LGT. Our job in Portfolio Advisory is to translate that into specific investment opportunities, including tactical plays.

Let's take US equities as an example. If the House View advises caution, that will be reflected in our recommendations - unless a client has a strong personal conviction. They might see cybersecurity as a compelling growth story and want exposure to selected US tech stocks. That's where we come in. As a sparring partner, we help them make informed decisions about what to invest in.

We also help clients look ahead: what happens if Ukraine and Russia reach a peace deal? What could the ECB's next move mean for markets? We help clients prepare for different scenarios based on their outlook.

And what if a client comes to you with something a bit more exotic? Are you able to help them with that, too?

Absolutely. Our job is to help turn our clients' ideas into workable investment opportunities. We have a very broad investment universe, so we're able to accommodate most requests - as long as they fall within the regulatory requirements. Take cryptocurrencies.

That's not something we provide advice on. But if a client requests a specific Bitcoin ETC (exchange-traded certificate) and meets the product criteria, we can add it to their portfolio. It's then simply classified as a «non-advisory position». We're also happy to collect publicly available information for clients on specific topics to help them make better-informed decisions.

What are some of the biggest challenges in investment advisory right now?

Global markets are deeply interconnected, and new financial instruments are emerging all the time, which keeps our work challenging, and exciting. Regulation adds another layer of complexity. We fully support investor protection, but the rules need to be workable and we need to make sure we don't take a good idea and regulate it to the point of absurdity.

If the advisory process becomes too cumbersome due to legal requirements, it will ultimately be the investor who pays the price. 

AI seems to be transforming just about every industry these days. What impact is it having on your work?

I think personal contact with an investment expert will always matter – even for the next generation of clients. But AI will increasingly help support what happens behind the scenes, for example, by accelerating decision-making, uncovering new insights and helping us spot patterns based on how similar clients invest.

We're already using AI in some areas. For example, we’ve introduced a tool that makes it easier to present complex quantitative data to clients clearly and understandably. Looking further ahead, I can imagine virtual reality becoming part of the mix. One day, our clients might be able to literally step into their portfolios and visually explore how different investments affect their risk/return profile.

How would you describe yourself as an investor?

I'm quite comfortable with risk. I'm invested in property, crypto, and private markets - the latter of which is an area I specialise in professionally. None of these investments requires daily monitoring, which suits me, because I don't have the time for that. In terms of investor type, I'd say I'm very much an advisory client myself. I manage my own portfolio, but I often like to run things past an expert.

Expert or Active?

With LGT Advisory Expert, you work alongside your relationship manager and an investment expert to shape your portfolio according to your goals – all while keeping risk firmly in view.

If you want to take an even more active role and qualify as a professional investor, LGT Active Advisory offers a more dynamic set-up. It turns the advisory process into an ongoing dialogue between professionals, with your investment expert as your primary point of contact.

Core-satellite – building around a core

The core-satellite approach allows investors to combine the best of both worlds: long-term stability and flexibility. At the centre is the core - typically a portfolio management solution – designed to support long-term financial goals. Around it, satellite investments give clients the freedom to respond tactically to market trends, pursue personal convictions, and build a modular, diversified portfolio.

Reto Stohler holds a Bachelor of Applied Sciences in Economics from the University of Applied Sciences and Arts Northwestern Switzerland. A Certified International Investment Analyst (CIIA), he joined LGT Private Banking in 2011 and now heads the Portfolio Advisory Europe team. Born in Basel, Reto brings a passion for investing to everything he does – and even enjoys the occasional market chat with his son when he's not at work.