Our team is on a mission to spark posi+ive change across the lives of those we serve. We do this by challenging convention, creating deep transformation and enabling confident decision-making for the future. We’re the go-to counsel for the most well-informed, wisest professionals who want a trusted guide to help unlock new possibilities and better results. This turns uncertainty into the certain by helping you master the best of what other smart people have already figured out. As the Middle East’s only certified fiduciaries, Chartered and fee-only firm providing comprehensive advice to individuals, families and businesses we’re here to start a revolution in the way you think, feel and experience the future. Visit our site to learn more www.aesinternational.com

2. Investors get SHORT CHANGED…
FACT
9.14%
3.83%
Average
market returns
Average
investor returns

3. Like
LOVE
and
LIFE
Investing can be challenging…

4. Like
LOVE
and
LIFE
Investing can be challenging…
BECAUSE OF COMPLEXITY

5. Like
LOVE
and
LIFE
Investing can be challenging…
BECAUSE OF COMPLEXITY
UNCERTAINTY

6. Like
LOVE
and
LIFE
Investing can be challenging…
BECAUSE OF COMPLEXITY
UNCERTAINTY AND EMOTIONS

7. A
n
d
can feel like
a
r
o
l
lerco
a
s
t
e
r
greed/buy
fear/sell
repeat
until
broke

8. You often regret
getting on…
A
n
d
can feel like
a
r
o
l
lerco
a
s
t
e
r
greed/buy
fear/sell
repeat
until
broke

9. And want to get off.
A
n
d
can feel like
a
r
o
l
lerco
a
s
t
e
r
greed/buy
fear/sell
repeat
until
broke

10. “
“
Carl Richards
The Behavior Gap:
Simple Ways to Stop Doing Dumb Things with Money
We’re all wired to avoid pain
and pursue pleasure and security but with
investing, this isn’t rational.

11. In other words…
It’s easy to blame
the economy or
financial markets for
underperformance…

12. In other words…
It’s easy to blame
the economy or
financial markets for
underperformance…
…but the REAL trouble lies
in the decisions YOU make.

13. We all suffer from
BEHAVIOURAL BIASES
Overconfidence
Loss aversion
Regret avoidance
Herding and social influence
Mental accounting
CAUSE

14. We all suffer from
BEHAVIOURAL BIASES
Overconfidence
Loss aversion
Regret avoidance
Herding and social influence
Mental accounting
Trusting the wrong person
Holding onto toxic assets
Not admitting earlier mistakes
Buying the ‘’last best’’ thing
or the ‘’next big’’ thing
Opting for ‘’free’’ advice
Effect

15. Which can devastate returns
£0
Market return over 20 years
£1,000,000
£4,491,333
£1,989,789
£5,000,000
Amount invested
Average market
return
Average investor
outcome
}The cost of emotions
(approx. £2.5 million)

16. Investing the right way
produces much
better results…

17. Investing the right way
produces much
better results…
...which
enables greater
peace of mind,
security, wealth
and a better life.

18. This document is part philosophy
and part process.

19. We’ve created it to demonstrate the
evidence
behind what we do*

20. We’ve created it to demonstrate the
evidence
behind what we do*
*And what you get

21. We believe financial services shouldn’t
be an industry.
Industries manufacture and sell things
that make THEM money.
Think cars or double glazing.

22. The financial industry is no different.
Banks, brokers and insurance
companies vend products
that maximise THEIR
returns - NOT YOURS.

23. We believe those helping people
with money must be
PROFESSIONALS*
*i.e. highly qualified/regulated and
determined to treat others as they
would want to be treated themselves.
Think teacher or doctor.
And (some) lawyers...

24. The hallmark of a professional
looks like this…

25. DARES TO BE
DIFFERENT
and challenges the status quo*
Our organisation...

26. DARES TO BE
DIFFERENT
and challenges the status quo*
*in everything we do
Our organisation...

27. We help you...
understand
protect
your
wealth
you live
a better life.
+ =
It’s about making YOU money
– not someone else.

28. Therefore:
OUR MISSION is to TRANSFORM an
out-dated financial services INDUSTRY
that manufactures and vends toxic
products, into a valued PROFESSION.
We call this:
POSITIVE
CHANGE

29. The Japanese called this
KAIZEN

30. …The British cycling team call this
‘MARGINALGAINS’

31. …The British cycling team call this
‘MARGINALGAINS’
As Simon [Sinek] says...
Let’s begin with ‘why’
SO

32. Investment means taking risks.
But not investing means the value of your
money goes
B
A
C
K
W
A
R
D
S

33. YOUR…
1914
£0.007 = 1 Pint
1963
£0.007 = 1/3 Small Glass
2016
£0.007 = 1.5 Teaspoons
money will buy less tomorrow

34. Investment markets have ALWAYS rewarded
L
ONG-TERM INVESTORS
1956
UK Value
Index
FTSE All-Share
Index
UK One-Month
Treasury Bills
UK Retail
Price Index
£1
£10,000
1963 1970 1977 1985 1992 1999 2006 2014

35. many people
don’t invest
correctly…
But…
They try
to predict
the future.

36. They act on
IMPULSE
“Everyone’s
making money
– I want a piece
of the action”
“I can’t take this
bear market
– I’m getting out!”

37. ? ?
?
? ?
?
?
?
?
??
?
?
?
?
?
They bet their savings
on tips and hunches…
“I heard it on
the news.
I’d better sell!”
“I got a hot tip from
my neighbour.
It’s an open goal”
“I’ve loved their
products for years
– it’s a dead cert”

38. They are swayed by the MEDIA…

40. HISTORYshows the greatest
advancements come from academia
Diversification
and Portfolio Risk
Harry Markowitz
Nobel Prize in Economics
1990
Single-Factor Asset
Pricing Risk/Return
Model
William Sharp
Nobel Prize in Economics
1990
Efficient Markets
Hypothesis
Eugene Fama
Nobel Prize in Economics
2013
Term Structure
of Interest Rates
Eugene Fama
Profitability
Robert Novy-Marx
Eugene Fama
Kenneth French
Value Effect and
Multifactor Asset
Pricing Model
Eugene Fama
Kenneth French
The Size Effect
Rolf Bane
2012
1993
1984
1981
1966
1964
1952

42. But
TOGETHER
we know more
than we do alone
How many beans are in this jar?
Go on, have a guess...

43. Answer=1,670
Guessesrangedfrom409-5,365
Averageguesswas1,653
Statisticians call this…
The wisdom
of the crowd.

44. So
What IS the best
way to invest?
Here’s the rub.
The industry
says one thing…
The evidence
says another…

45. Approach 1:
The industry’s approach
is known as
active management
This…
Attempts to identify mispricing
in securities
1
A hare not
a rabbit

46. Approach 1:
The industry’s approach
is known as
active management
This…
Relies on forecasting to select
‘undervalued’ securities or timing
the markets
2
A hare not
a rabbit

47. Approach 1:
The industry’s approach
is known as
active management
This…
Generates higher expenses, trading
costs and risks
3
A hare not
a rabbit

48. It attempts to OUTGUESS the market
This leads to higher
turnover and excess costs.
when they think
they will
outperform
when they deem
them overvalued
The Market
BUY
Active managers...
SELL

49. Active investment methods have
low odds of success.

50. Approach 2:
The evidence-based
approach is called
passive management
or indexing
This…
Removes the risk of picking
the right stocks
1
A tortoise
not a turtle

51. Approach 2:
The evidence-based
approach is called
passive management
or indexing
This…
Attempts to match the performance
of the chosen index
2
A tortoise
not a turtle

52. Approach 2:
The evidence-based
approach is called
passive management
or indexing
This…
Prioritises low tracking error over
higher attempted returns
3
A tortoise
not a turtle

53. It attempts to match the returns
of a COMMERCIAL INDEX
INDEX LIST
HOLD
a basket of
securities
represented
in the index
Passive investors...
The Market

54. This means YOU PAY to LOSE
your returns.*
OUCH!
FACT
*Your money buys your
fund manager this...
Over the long term, 97.8% of Approach
1 (active) funds, have failed to beat their
index after fees and charges!

55. How does this evidence inform us?
LEAN
AWAY
heavily towards
passives
from actives
and
While avoiding toxic
stuff like structured
products and
unregulated funds.

56. UNDERSTAND

57. UNDERSTAND
THAT SUCCESSFUL INVESTING
MEANS YOU MUST…

58. STEP1 - Accept the market’s price
Daily average
trades in 2014 =
Daily average
trades in 2014 =
60
£194
MILLION
BILLION
Each one represents the latest estimate of worth of the entire market.

59. STEP2 - Beware of market gurus
One of these two dresses in an elaborate costume to make you
think they can predict the future. The other has a crystal ball.

60. “ Warren Buffett
Keep in mind
the only value of
stock forecasters
is to make fortune
tellers look good.
‘Gurus’ includes bankers, discretionary
managers, IFAs, radio pundits and the
financial press.

61. STEP3 - Control your costs
control fund performance
control the fees you pay
/
This is the only FREE lunch in investing
YOU CANNOT
YOU CAN
BUT

62. STEP4 - Spread your risk
Diversify beyond your home market to reduce
risk and improve your return.
FTSE All Share Index (1988-2014)
Annualised Return 9.23%
Globally Diversified Portfolio (1988-2014)
Annualised Return 10.37%

63. STEP5 - Be disciplined
Aside from costs, the main
reason for poor returns is
There will be
good years
and bad years.
YOU!
...Sokeep a cool head...
it pays to stay invested.

64. STEP6 - Stay balanced
Academic research
has identified these
factors are important
within a cost-effective
portfolio.
EQUITIES
- higher risk, investing in companies
MARKET
COMPANY SIZE
RELATIVE PRICE
PROFITABILITY
FIXED INCOME
- lower risk, lending money to
companies and governments
TERM
CREDIT
}

65. GOOD
NOT
Accept that
is
SPECULATION
INVESTMENT

66. A Chartered
Financial Planner
can help you with
this if you aren’t
comfortable
yourself.

67. Consider this…
In May 1997,
Deep Blue
beat Kasparov*
*Widely considered the best chess player ever.
Computers
trumped the
greatest
human minds.

68. In the last 20 years technology has evolved.

69. And so has investment
Everyday…
Better
products
come out…

70. And so has investment
Everyday…
Greater
insight and
evidence is
gained…
Better
products
come out…

71. And so has investment
Everyday…
More choice
and more
solutions are
available.
Greater
insight and
evidence is
gained…
Better
products
come out…

72. A Blackberry was great 10 years ago...
But the world moves on.

73. Be FROZEN in time
(stay with the industry)
You have TWO choices

74. Or embrace the innovations now available to you.

75. The way investment advice is given has
also evolved…
The stockbroker The insurance salesman /
conflicted IFA
The fee-based
financial planner
(my granny used
one of these)
(my parents
regretted using
one of these)

76. The traditional IFA approach
Tactical performance chasing
Driven by relationship and ‘friendship’
Decisions based on individual guesswork
Plays on your emotions
Complex opaque products
Ad hoc processes and promises
Hidden commission
EXCITING BUT FLAWED
Then

77. Our approach
Strategic risk management
Driven by evidence
Decisions based on probability
Constrain emotions and ‘friendship’
Transparent simple products
Disciplined and centralised processes
Fee-based
BORING BUT EFFECTIVE
Now

78. Or challenge
the status quo
and get better
results*
You have TWO choices…
Listen to
comforting lies
(which are still lies)...

79. *
$7
trillion
has entered passive funds in the
US and Europe - so don’t worry,
you won’t be the first!

80. You can now get an investment approach
that uses evidence and
Better
outcomes
Evidence
theory
Sound
investment
philosophy
Robust
portfolio
structure
Tight cost
management
Strong risk
management
Nobel prize winning research
to get a better outcome.

82. •Across securities,
markets and asset
classes
•Getting this right is
the most important
decision you will make
•Avoid unnecessary
risks
Balance
Growth and
Defensive
assets
Select risks
carefully
Diversify
broadly
Combined with common sense

83. Portfolio
structure
We focus on...
Controlling
costs
Managing
risk
Focus on doing a few things
exceptionally well

84. It needs to be right for you
Defensive
assets
Risk
Return
Your
portfolio?
Growth
assets

85. Prune costs
Costs are larger and more dangerous
than they may appear.
That’s not
the Titanic

86. Prune costs
Costs are larger and more dangerous
than they may appear.
That’s not
the Titanic
But that is a
dangerous iceberg

87. You can find out your current costs
by getting a*
*We recently saved an investor over £11,400pa in charges.
SECOND
OPINION
REVIEW.

88. AND we help integrate better investment
with REAL financial planning.

89. AND we help integrate better investment
with REAL financial planning.
So YOU actually know where YOU are
going before you start…

90. Planning
process
Investment
process
Governance
process
This is called cashflow planning

91. We are radically
TRANSPARENT,
which can make people
uncomfortable if they:
Don’t like hearing the truth.
OR
Aren’t used to being told it...

92. But trust us on this…
Professional philosophy and
process matters more than
how much you enjoy golf or a beer with your financial adviser ‘friend’;

93. But trust us on this…
Professional philosophy and
process matters more than
the fact that your financial adviser comes to your house; and

94. But trust us on this…
Professional philosophy and
process matters more than
quarterly financial reviews where a fortune telling salesperson
churns your funds, asks for top-ups or asks for referrals.

95. We cut YOUR costs
And improve YOUR returns.
In order to enable you to live a better life.
+
=

97. Our approach isn’t
PERFECT for EVERYONE
• Our clients typically are people with important and often complex decisions to
make about their investments and financial plans.
• They are busy people who have little time to spare.
• They often have high income and/or significant investable assets.
• They trust us as professionals and aspire to have the best.

98. There is
TENSION
because we cannot help everyone*
But we will try and offer guidance to
those we cannot advise, because
mistakes are costly and easy to make.
*Minimum investment levels apply

99. Balancing our commitment to our
mission with our resources is
challenging - but it’s also partly
what makes us DIFFERENT.
This gives us more scope
for POSITIVE CHANGE.

100. HAPPY
INVESTING…
(you are nearly at the end)

101. WE WERE INSPIRED BY
• Jack Bogle, Vanguard
• Dimensional Fund Advisors
• BlackRock iShares
• Robin Powell, The Evidence Based Investor
• Andrew Hallam, The Millionaire Teacher
• Carl Richards, Behavior Gap

102. Contact us to learn more.

103. MORE ABOUT US
• Our team is on a mission to spark posi+ive change across the lives of
those we serve. We do this by challenging convention, creating deep
transformation and enabling confident decision-making for the future.
• AES is the Middle East’s only certified fiduciaries, Chartered and
fee-only firm providing comprehensive advice to individuals, families and
businesses we’re here to start a revolution in the way you think, feel and
experience the future.
• Values are what we value.

104. REGULATORY STUFF
• Risk warning: Investment into any investment portfolios should be regarded
as medium to long term. The value of investments and the income from them
can fall as well as rise. The value of your fund is not guaranteed and you may
get back less than the amount invested, and you could lose part or all of your
capital. Past performance is not a guide to future performance. Changes in
exchange rates could affect the value of overseas investments. The effect of
inflation could reduce the future purchasing power of your investments.
• Regulatory information: For all of our authorisations and regulatory
information, visit
https://www.aesinternational.com/legal-information/authorisations-and-
regulations
• Copyright: Please feel free to copy or share any of our ideas or work as
widely as you like. We think that the more people who engage and
learn
about good investment from us or others the better.