Diversification - Because cash isn’t always king

  • Cara Casey
  • 30 March 2023
  • 5 mins reading time

Diversification is a key investment principle here at Schroders Personal Wealth (SPW) and so we met with Associate Adviser, Mervyn Casserly, to find out how he explains the importance of a diversified portfolio with his clients.

What has your journey to become an Associate Adviser consisted of?

I joined the Schroders Personal Wealth academy in March 2021 as a trainee adviser. When I started I had just one financial advice related exam under my belt and an interest in helping people. Now, I’ve passed all my exams and I love advising clients and helping them achieve their financial goals.

Prior to joining Schroders Personal Wealth, I used to ask myself, “Is what I’m doing right now something of value?”. I can confidently say that what we do here at SPW really can make a difference to people’s lives. Whether it be experienced investors or those who have recently come into money and are investing for the first time, every person I speak to has come to us for support. For me, that’s what I find the most rewarding about my job. We go through everything clearly and give each client a personalised financial plan which could add value to the way they choose to live their life.

Each client you form a relationship with and give advice to is different. They have different needs, circumstances, preferences, and risk appetites. In terms of diversification, is there a key piece of advice you tend to share with clients?

Each client is unique, and it’s important to advise clients on their individual circumstances. When it comes to diversification, I’ve noticed that many people tend to have a larger weighting towards cash as it’s what people are used to, and they view banks as being safe. Diversification may not be for everyone, especially if a client is not willing to take any risk at all. However, what is important is to discuss the benefits of understanding the other options out there, as holding cash isn’t as risk free as it can seem.

What is diversification?

Diversification simply means not putting all of your investment eggs in one basket. The idea is to spread your risk exposure by investing across different asset classes.

This means that investments that perform well in a diversified portfolio will likely balance or outweigh other investments that may not be performing as well. This could provide a degree of protection against major losses to your money and investments.

As a financial adviser, I’m able to highlight that there are alternatives available, explain what those options are and what I recommend specifically for them. The trusted relationships I build with my clients allows them to make informed choices and become more confident and knowledgeable with their own finances.

Is there a particular scenario that you’ve experienced with a client where you helped grow their financial confidence through advising they diversify their portfolio?

Last year, I had a client who had £100k in cash. She originally spoke with her banking consultant and was then referred across to me from Lloyds. In her words, her cash was just sitting there and not doing much. A lot of the money was already in a cash ISA, which meant it was easy to access, but it wasn’t working in line with what she wanted it to do. I discussed the different options she had available, and from this, she decided she’d reposition some of it, keep some for planned spending and also leave some as an emergency fund so she felt comfortable investing as she was a first-time investor.

Both my client and her husband are retired and have children and grandchildren – with family being the most important thing to her. She wanted to take a medium level of risk on the funds and after looking at her finances holistically we found that she had surplus funds to her needs, and she committed to invest £50,000. This way, the funds helped with additional diversification as well as the potential to keep buying power in the future through investment growth. As a result, my client continues to live a good lifestyle and has plans to potentially buy a holiday home.

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