As standard practice dictates, when we approach a medical professional with health concerns, we expect a thorough diagnosis before an appropriate treatment is prescribed. Indeed, it would be reckless and negligent for a doctor to prescribe remedies without understanding the problem. Understanding before intervening is a fundamental principle that is successful not only in medicine but across disciplines because it allows experts to ground their actions in reality rather than assumptions.
Yet, when it comes to investing, there is a tendency to invert this philosophy: Products and solutions are shoehorned into portfolios based on marketability rather than actual alignment with investor objectives, with strategic rigour playing second fiddle to sales incentives. This approach leads to investment strategies that resemble an arbitrary collection of products rather than wealth-building vehicles. At best, these types of portfolios create suboptimal returns for the risks taken. At worst, it causes financial insecurity, governance challenges, tax inefficiencies, and hidden risks, which emerge during market volatilities or life transitions.
At Waterfield Advisors, we restore order to this process through our Initial Portfolio Diagnostic, or IPD, which is a rigorous examination that seeks to answer crucial questions: What is this portfolio today? What did it initially aim to achieve? What can it become through structured realignment? This detailed exercise, which we undertake at the beginning of every advisory relationship, is the bedrock upon which we develop personalised and holistic wealth strategies.
What is an IPD?
An Initial Portfolio Diagnostic is a comprehensive analysis of an investment portfolio that enables advisors to evaluate investors’ existing portfolios and identify strengths, gaps, and overarching alignment with long-term financial objectives. In essence, the process goes beyond standard reviews to get deeper insights into:
- Strategic Alignment: Evaluating gaps and understanding if the portfolio is aligned with the investor’s short-term and long-term wealth objectives.
- Performance Analysis: Identifying elements of the portfolio which are performing well and those which are underperforming, as well as the factors and market dynamics driving those results.
Once a detailed report is generated, a revised portfolio is developed that addresses these diagnostic insights through identified opportunities, creating a financial roadmap that is optimised for performance that is aligned with the risk approach.
The Waterfield Edge
Portfolio reviews explain what you own and how it is performing, but sometimes they may not explain why it’s structured the way it is or whether it still makes sense for your portfolio. With us, investors walk away with a detailed view of their current portfolio, an understanding of portfolio alignment with financial objectives, and a clear articulation of what can stay, what needs to go, and what must evolve.
Our 360-degree analysis of investment portfolios includes:
Objective & Intent Mapping
After analysing the portfolio’s DNA, we translate it into an investment strategy that is more aligned with the goals of the investor.
An Outside-In Review of Asset Allocation
We have a macro-to-micro approach when it comes to asset allocation. We go beyond percentages to understand allocation across styles (active, passive, passive plus, direct), philosophies (growth vs. value), market caps (large, mid, small), durations and credit.
This helps us to not only understand if your allocations are working with or against each other but also to uncover if your portfolio is truly diversified or if it holds different versions of the same thing.
Risk Pools & Return Profiles
In addition to measuring risk, we segment the portfolio into risk pools: safety, market, growth, and international. This enables us to evaluate whether the instruments in your portfolio align with that segmentation and are, by design, positioned to deliver optimal outcomes.
Manager Evaluation
We evaluate fund managers and investment teams on both numbers and calibre. This includes alpha generation, performance in rising and falling markets, consistency of results, risk-adjusted measures like the Sortino ratio, and specialised metrics like information ratio and net selectivity.
We also assess the manager’s pedigree, investment philosophy, organizational stability, team depth, integrity, and accountability for results.
Alternates
In the alternative space, we assess funds and direct exposures and review the portfolio’s balance across stages—Seed, Series A, B, Growth, Late Stage, and Pre-IPO — and determine if the exposure in this space needs adjustment. We evaluate fund managers in the alternate space through a lens as robust as we do for listed investments.
Final Thoughts
Most traditional portfolio reviews end with the “what” of your investments, without exploring the “why”. An ideal IPD not only exhaustively delineates the reasons behind your portfolio performance but also treats your portfolio as a dynamic system that is meant to evolve and adapt to changing situations and goals.
It is equally important for an IPD to be product-agnostic to provide an analysis that prioritises the investor’s needs. Waterfield’s pioneering conflict-free structure allows us to provide unbiased views without product blinders, since we are not incentivized to retain or reject any product. This objectivity helps us to spot not only the financial inefficiencies but also any behavioral patterns that may be quietly working against your goals.
Ultimately, it is only when we take a closer look and go under the surface, can we create a portfolio that is calibrated for risk, performs consistently, and delivers continued relevance.
