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Inside Hoxton Wealth’s New Portfolio Strategy with Pacific Asset Management | Freddie Streeter

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In this episode of the Hoxton Life podcast, Chris sits down with Freddie Streeter from Pacific Asset Management to unpack the thinking behind a powerful new partnership.

 Together, they've built five risk-rated portfolios designed not around spreadsheets, but around real people - grounded in simplicity, discipline, and behavioural insight.

They discuss:

  • Why "alpha is in the advice"
  • The rise of passive investing and what it really means
  • How PAM’s technology supports clearer, faster communication
  • How Hoxton’s planning philosophy shaped the portfolios
  • The importance of staying invested and avoiding emotional decisions

This isn’t just an investment strategy. It’s a modern approach to financial planning, co-created for long-term success.

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Speaker 1:

We have this saying at Pacific Asset Management that alpha is in the advice and we truly believe that the role played by the financial advisor in a client's investment journey is so unbelievably integral. Pacific was started really to do two things. On the one side of the business, we have created active strategies to fund allocators around the world. The other side of the business is the business that I look after from a distribution perspective, and this is where we build holistic multi-asset solutions for a relatively reserved amount of RFA clients around the world.

Speaker 2:

We hear a lot of active versus passive. Obviously you are managing the passive portfolios for Hoxton. What does that mean? What does passive investing mean?

Speaker 1:

Asset class returns can be very unpredictable. Volatility of those asset classes can be quite predictable, especially when you're looking at multi-decades. So if you get that initial mix correct, that's the first goal.

Speaker 2:

Bad investors panic and sell everything, good investors sit on their hands and do nothing and great investors lean into the volatility and, you know, try and embrace it where they can. Great thanks, freddie, for coming down today and welcome to the hoxton life podcast. It's been uh, it's been a while since you and I've known each other. Now, as we'll come on to, and it's great to be having you on here and working with Pacific going forward, or Pam, as you more commonly know. Can you start by telling us a little bit about Pacific and the philosophy behind it?

Speaker 1:

Yeah, absolutely. And look, chris, thanks for having me. It's great to be here today in the Hoxton offices in the UK. So Pacific was started really to do two things.

Speaker 1:

On the one side of the business, which accounts for roughly half of the sort of 10.4 billion sterling we run for our clients, is where we have created and distribute single manager craft active strategies to fund allocators around the world.

Speaker 1:

So we run money for some of the largest canadian pension schemes. We run money for some of the largest us state pension schemes and we do those across active managers and typically when we think about active we think about active in regions that make sense, so where we think there's ability to outperform, because we're also big, big believers in, as I know you are. So that's one side of the business. As mentioned, it accounts for roughly half of the assets. The other side of the business is the business that I look after from a distribution perspective, which is what we call our technology-enabled solutions business, and this is where we build holistic, multi-asset solutions for a relatively sort of reserved amount of RFA clients around the world. And when we say solutions, what we mean is end-to-end investment solutions with significant support, infrastructure and communication infrastructure, and our view is that to create truly effective solutions for financial advisors, you need technology, and so, for us at pacific asset management, technology is absolutely key to everything we do great, and how did the partnership between us and yourself come about?

Speaker 1:

yeah. So I guess I mean we'd say that we've known each other for a long time I guess that's almost probably 15 years I mean I would say the vast majority of my time in the industry and we've probably spoken for most of those 15 years about what's going on in the industry, what's best for clients, what are the interesting investment concepts that are out there. And I think more recently we spoke I guess perhaps a little bit more seriously about creating an investment solution that matches your advice process, ie a solution that is cost efficient, it's risk profiled and it thinks about long-term strategic goals.

Speaker 2:

So for someone who has never heard of Pacific before, how would you describe what sets you apart from other asset managers? Obviously, there's lots of asset managers out there. What makes PAM Pacific Asset Management different to everyone else?

Speaker 1:

Yeah, great question. I mean I think I could sit here and go oh well, we've got all the best investment talent in the world and we run all these billions. But I think there's lots of companies out there with great research and lots of expertise. And so I think one thing that does truly set us apart as cheesy as it may sound it's a recognition of the role played by the financial advisor.

Speaker 1:

We have this saying at Pacific Asset Management that alpha is in the advice, and we truly believe that the role played by the financial advisor in a client's investment journey is so unbelievably integral. It's getting them to start the investment journey in the first place. It's making sure they're in the right you know tax brackets, making sure they're using up their ISAs and their lifetime ISAs and their SIP allowances all the stuff we're not massive experts in allowances, all the stuff we're not massive experts in. You know, our role in many ways is to recognize that, because once you recognize that you're the main alpha generator, we can then to start to work alongside you in ways that support you in that. And yes, of course, benchmark beating performance always has to be there. Cost efficiency and diversification always has to be there. But so too, in our minds is, you know, unrivaled support for financial advisors and a technology infrastructure that helps them communicate with their clients.

Speaker 2:

It's awesome so let's talk now. Let's get under the nitty-gritty, let's get underneath the hood and start talking about the portfolios that you've developed for us. So can you walk us through high level? We've talked briefly about it the five risk-weight portfolios, but you know we've built together for our clients yeah, sure.

Speaker 1:

So we have built five risk mapped portfolios, ranging from a one up into a five, the one being, I guess, the one with the lowest volatility and the five being one with the highest volatility. In simple terms, you've got a lower level of equities in the lower one and a higher level of fixed income, and as you move up you increase those allocations to your equities, which is typically your capital appreciation asset over time. And those portfolios have been built Well. They've been optimized by Pacific Asset Management. What optimization means is we ultimately look to create the best mix of assets for a certain level of risk. We do that through internal proprietary optimization tools. We do that by thinking about five things we think about liquidity, we think about data. We think about liquidity, we think about data, we think about currencies, we think about access and we think about overlays or all flaws and caps as we talk about. So what we do if we just take data for the first instance, we take multi-decades of performance, volatility and correlation data and we use that to create our asset mix across those different risk profiles. So I, how much are we going to have in global equities versus, you know, uk equities, for example, once we identify those uh sort of optimal asset mixes across our portfolios. We then populate those with assets in the capital markets that we think represent the best liquidity. So typically that points us towards global equities and it points us towards global high quality fixed income. I mean, often people talk about high yield and they talk about emerging market debt, but those are often asset classes that in you know times like now, when you've got sort of irrational heightened markets, they can actually act a little bit differently. So we're trying and these long-term strategic portfolios, to harness. You know, the best, most liquid asset classes for these types of portfolios, the.

Speaker 1:

The next thing we look at is currencies. So how do we then access these different asset classes? From a currency perspective? Typically global bonds, we hedge because your bonds are supposed to be your predictable sort of boring asset class. But if they're being swayed around by what's going on in currencies, that kind of dominates their returns. And then for equities, we tend to remain unhedged because there is a typically a positive correlation between currencies and equities. And then, lastly, we have a relatively high UK bias in our equity space in the portfolios you know. Given you know these are the sterling based portfolios, it alleviates a lot of the currency risks um and also it gives us um. You know, lots of the uk companies are dominated by very international businesses, so that's what those portfolios look like across those different risk profiles interesting.

Speaker 2:

So, for a cautious investor, you're going to be in, you're going to be invested in more fixed income, which essentially is bonds, which is you lending or the investor lending to a government or to a corporate, which obviously would give you a more fixed, predictable return. And then, as we get up the risk curve, to people who want to be more growth orientated, which basically means that you're happy to accept higher volatility and we know that volatility is just the price of admission in portfolios. If you're investing in equities, we, uh, we, we invest in more equities and equities are obviously shares of individual companies and you uh, there is not a predictable return, but you have the ability and historically have outperformed fixed income bonds over longer periods of time. Yeah, absolutely right. So how do you ensure that the portfolios stay aligned with current market changes? Obviously, at the moment, lots of market turmoil, lots of stuff happening in the markets. How do you make sure of that?

Speaker 1:

Yeah, so great question. So clearly there's a lot going on in the markets and those quite significant things that are going on in the outside world have an impact on the capital markets. I think you would have had to have your head in the sand to not know that. Markets have moved a lot over the last well, actually year today, but also the last few weeks on the back of tariffs and Trump trying to fire Powell and then deciding he wasn't going to fire Powell and all that sort of stuff. But for us, the most important thing from the outset is to get that asset mix correct, based around the level of volatility that we want to align to Asset class.

Speaker 1:

Returns can be very unpredictable. Volatility of those asset classes can be quite predictable, especially when you're looking at multi-decades. So if you get that initial mix correct, that's the first goal. What we then need to think about is making sure that the assets within there stay within those lanes. As we say, we always talk about staying in your lane of these different risk profiles and so clearly the overall portfolio has its volatility bounds and so if it breaches, then we have a trigger.

Speaker 1:

But within that, each and every asset that is within the Hoxton portfolio. They also have their own tolerance bands. So if those tolerance bands breach because markets are going up or, conversely, markets are going down, because being in a lower risk profile than you're supposed to is also not correct, you need to have the appropriate level of risk. Then these trigger rebalances and then these rebalances allow us to put those portfolios back into the line of where they should be. I should say it's the job of the PhDs in my companies to make sure all those are correct, because it's one of the most important things making sure the risk in those portfolios is appropriate for the client investing in it.

Speaker 2:

I suppose loose, loosely put in times at the moment where we've seen equities pull back quite a lot, that offers an opportunity potentially to invest some more into equity from the fixed portfolio that maybe has fared better, which is again bad. Investors panic and sell everything. Good investors sit on their hands and do nothing and great investors lean into the volatility and, you know, try and embrace it where they can. What it doesn't mean is is that you've dumped everything into cash and sitting on the sidelines hoping to time the market.

Speaker 1:

Absolutely, I would suggest that, specifically, if you've got a long-term goal that's been set by your financial advisor, at no point has that long-term goal ever said let's try and get out when the markets are selling and get back in right at the bottom, because you know invariably that doesn't happen. It's incredibly difficult and, yes, you know people talk about. Well, you might be able to see, you know what's going on in markets, you might be able to catch a little bit of the you know, miss out on a bit of the downside, but the massive risk is that you miss the bounce. And what history shows us, what studying long-term market dynamics shows us, is that if you miss some of those big days, it can be massively detrimental to the long-term growth of the portfolio. So it's about staying invested, number one. But if there's excess capital, it's trying to save and add to your portfolio so that pot at the end of the life is even bigger.

Speaker 2:

And we've seen that over the past few weeks we saw markets crash down and then we saw a big uptick of 10% or more in one single trading day. I believe it was like the biggest trading day since the early 2000s. But you can't time that and that's the problem. It's after the worst days, the best days come, which is, you know, which is key, like you keep saying time in the market.

Speaker 1:

Yeah, absolutely key, like you keep saying. Time in the market? Yeah, absolutely, and I think you know what the market environment we find ourselves in at the moment is particularly difficult because I mean, you think of some of the other things we've seen, like covid or, or, you know, the inflation in 2022. You might have been able to have some sort of idea about these bigger trends and getting in lower or whatever it is, but we still think that is, you know, a fool's game. It's even more difficult in a world like we are at the moment, when you have, you know, donald trump, who is, you know, is incredibly inconsistent and one minute he said one thing and literally the next day, he said another thing. Yeah, and predictions have always been a very, very bad way to invest, but currently they're particularly bad and you'll just and you know that as they whipsaw, you'll, you'll get, you'll get caught out in a lot of instances.

Speaker 2:

So let's let's come on to that a bit more, because that is really the ethos as well of passive investing. Um, so we hear a lot of active versus passive. Obviously, you are managing the passive portfolios for hoxton. What? What does that mean? You know what does passive investing mean?

Speaker 1:

yeah, great question. So I guess, to put it simplistically, you really have two ways to access asset classes. You have passive access and then you have what they call alpha products. Yeah and um, alpha is where you're trying to invest in a given market s&p 500 world, you have footsie 100 world and the intention of that active management is to outperform a given index, whatever that index might be. Of course, um, there are things to consider higher fees and the possibility that you don't outperform, so you could be in a scenario where you're paying higher fees and you're underperforming.

Speaker 1:

Passive is ultimately the most efficient way to access an asset class. So if you want to go and buy the S&P 500 or the stocks that sit within there, the best way to do that is to invest in, perhaps an etf or a tracker fund. Yeah, remember, you can't buy an index, you can only buy something that tracks it. Yeah, and these days, with broad based etfs, you can get very cost efficient. Uh, um, access to these markets. Of course you can't outperform, but you know it's that kind of that's, that's the difference?

Speaker 2:

and why do you think passive so in vogue? Why do you think it resonates with a lot of investors? We've seen a huge shift out of these alpha products, or we would term them more actively managed products, like you said, trying to outperform the market, and there's this whole wave. I mean, there's even been cult like uh status developed across some of it. So why? Why is passive? You know what? Why do you think it resonates so well?

Speaker 1:

yeah, I think there's a few different reasons. I think, um, I think just in the outset, you've you have a lot of um alpha products out there that are sort of closet benchmark huggers. I they claim to be looking to outperform, but what they're really doing is hugging a benchmark. Uh, so not underperforming massively and charging fees, and I think knowledge and the internet has made people more aware of that. I also think that people are slightly more educated. They understand what ETFs and and tracker funds do and I think, particularly with those investors who have really long-term mindsets, it's a very high probability way of of growing assets. Um, and I think the other thing is, you know, people always assume that sort of the passive is kind of the dumb money, but actually what passive is is the marginal buyer. It is the collective of all the active managers out there, and if all the active managers be say right, we should be buying this, then the etTS gravitate towards that. So it's a great way to get a very efficient exposure to the marginal buyer of asset classes.

Speaker 2:

Basically, Interesting, it's very difficult to outperform over long periods of time. We've seen that and obviously the cost associated with it as well has been very much thrust into the limelight. I mean some through our portfolios. I think some of them are as low as you can get the institutional share classes, because you guys put so much money into them so you can get access to them for our clients, which is amazing. They're like five basis points.

Speaker 1:

Yeah, exactly, and what that means is obviously, optically, for clients it's cost efficient and everyone loves things that cost efficient. But what it really means in real terms is that you track the index. You're looking to track very, very well.

Speaker 2:

Yeah.

Speaker 1:

You know, historically I mean you go back 15, 20 years where passives were sort of first created you might be accessing some of these ETSs for closer to a percent, which means over 10 years you're going to underperform by 10% these days. Over that same time period, you're potentially underpending by 0.6 of a percent. And if you've got long-term horizons, really long-term horizons, if you start your journey, as everyone should, what is it when you're basically starting your career, really shouldn't you? Some of us might have 40, 50 years to invest and actually, if you're saving those sorts of returns, it can be very, very powerful. Same, yeah, and I think, particularly for those longer term pension, life planning goals, it's super important to have to have passive in your portfolio and to put five basis points into perspective.

Speaker 2:

That's 0.05 of a percent for those watching.

Speaker 1:

You know correct yes, and if you have a 10 allocation to that, yeah, it's 0.005, it's 0.005, so it's yeah, it can be the. You know the cost implication is very low.

Speaker 2:

That's awesome so we've obviously talked um quite a lot about passive and we've talked about the positives. Do you say there's any misconceptions that people have with passive investing? Would you say there's any stories that you look at and go well, actually that's not true and that's not actually what it is yeah, I mean, I think I think there's one.

Speaker 1:

Yeah, I mean, I think that there is this perception that if it's passive you can do it yourself.

Speaker 1:

Yeah, it's like well, if you're investing me in a passive portfolio, what do I need you for sort of thing? You know, you know I need you to pick me a good active manager, but actually that's that's. That's completely wrong and actually lots of studies suggest that the most important thing to returns over manager selection, so over sort of active and stock selection is actually asset allocation. You know that strategic mix of equities versus bonds over the long term. But it also is super important for making sure that you understand the currencies in the portfolios. I mean the amount of times I've seen portfolios where you've got clients through, potentially in Sterling, who are buying unhedged global equities and before they know it, their global equities are down 20% because the currency's moved and they're suddenly like that was supposed to be my anchor in my portfolios and I'm now down massively yeah um, and it's also um having someone at the other end of the line to pick up the phone to should markets be, you know, selling off massively.

Speaker 1:

you know it's having someone like myself that you guys can call and say look, what's happening in markets. You know this is the portfolio you built for us. Tell us why this is selling off, tell us why this is protecting really nicely, because that communication element as well is so important and that's typically what keeps clients invested.

Speaker 2:

So important, and it's really important for clients to make sure that they feel educated over time and at a speed of things. It is very, very difficult, if you've got hundreds of thousands, potentially millions of pounds of your assets invested, as much as we might say this, to shut your eyes and put your hands over your ears, especially when everything is thrust in front of you as it is at the moment. So let's talk about Trump tariffs then it would be a misdraft not to touch a point, wouldn't it?

Speaker 2:

So let's talk a bit more about that. So how have they impacted the portfolios that we manage together? What changes have you seen as a result of the tariffs that have come in in the portfolios that we manage?

Speaker 1:

yeah. So I mean, we all know, I guess, what's happened. I perhaps think there was an underestimation of, perhaps, the breadth of the tariffs and also, I guess, the size of many of them. You know we had, you know we had, I think you would. You know, very few people thought there wouldn't be any tariffs and come Liberation Day, what was clear is that they were much more widespread, so all over the world and actually much, much higher than people thought, and clearly that was.

Speaker 1:

You know, the market had a bad reaction to that. You saw capital markets, particularly equity markets, sell off quite significantly and, as a result, anyone that is taking on risk within their portfolio would see losses. So the important factor there is to make sure that you're in a portfolio that is diversified. So I look up, you know, the hoxton uh three, which is the sort of the balanced portfolio, and it's down around 2.2 2.3 percent year to date, which you know. In a world where we've seen, you know, incredible volatility this year. That's the kind of production you're getting why? Because you've got, you know, uk equities that is up this year and there's a significant allocation to that in the portfolios. Also, given that slightly higher level of UK equity exposure. You haven't been exposed to the dollar, that strengthening dollar, which is not great for sterling-based portfolios, which many have.

Speaker 1:

All of the bond holdings in the portfolio are positive year-to date, which is protecting the portfolios really nicely. And then, actually, your EM exposure as well. Whilst it's fallen, it hasn't fallen as much as perhaps global, given that high US allocation. So EM is emerging markets yeah, sorry, emerging markets exactly, and that makes up part of the portfolios. And there's some incredible companies out in the emerging markets. And so, given this sort of diversified mix, yes, we've seen S&P down about, at times close to 20% in sterling terms, I believe, from the peak. You've had NASDAQ down even more. You've had these big, recognisable markets falling significantly, but the portfolios, particularly those lower risk portfolios and the medium risk they protect really nicely Remained resilient, haven't they during that period?

Speaker 2:

Yeah, absolutely so. What adjustments, if any, have you made?

Speaker 1:

So in the Hoxton portfolios, given the philosophy behind them, which is harnessing long-term strategic asset allocation based on multi-decades of performance, volatility and correlation data, there have been no changes over this period, and that is the approach, you know. It's about creating something that's cost efficient and performs over the long term. Making sure that they sit within the right lanes, yeah, communicating them effectively to you so you can speak to your clients about long-term investing yeah and doing so in a very cost efficient way.

Speaker 2:

That's very interesting, isn't it? Because naturally you would think as investment managers you'd be doubling down, but really you've built a portfolio that's doing the the lifting and the hard work, and that's why the portfolio is not one and a half, two percent cost. The portfolio is extremely cost efficient but, you know, over long periods of time it kind of comes out in the wash exactly, and that's and that is.

Speaker 1:

You know, that's why we call ourselves a solutions provider, because we've spoken as we talked about at the beginning for over a decade and one thing that was clear is that the culture and the DNA of your client base and the way in which your advisors think is to harness efficiency, and these are some of the most efficient portfolios that you can, that you can buy so looking ahead now.

Speaker 2:

So we've talked a lot about what's happening at the moment. Looking ahead 12 months down the line, where do you think markets are going to go, if you have any opinion at all?

Speaker 1:

do you know what um predictions are dangerous? Yeah, um, I can't count on my two hands how many times, over the last two weeks, I've seen some of the most prominent thinkers in the industry try to predict what's going to happen, whether that be on. What's going to happen in equities, what's going to happen in bonds? What's going to happen, you know, are tariffs going to stay on, are they going to go off, et cetera, et cetera, and I think it's particularly difficult at the moment, with an administration in the US that genuinely changes your policy daily. Yeah, what I think is probably quite likely is that there will be a period of heightened volatility, and so a financial advisor's role has never been greater in that education process.

Speaker 1:

Volatility is a part of markets. It, you know, it is, it's part of its very fiber and, as we talked about earlier, it's about understanding volatility and then ultimately embracing volatility. Um, but I think it's in many ways, it's it's business as usual. You know, markets have these periods, these black swan events although this black swan event was telegraphed quite quite a lot by trump but it's about looking through these, and markets will look through them, and there'll be a time where clarity emerges and growth continues it's interesting, isn't it?

Speaker 2:

because a lot of people will not realize that actually markets are priced in a lot of where they think it's going to go. And you know, if they price, if they believe that it's going to continue to be negative, they'll price that, they'll price that in. There's not a lot you can do about that.

Speaker 1:

Markets are incredibly efficient. They're a lot smarter than us and because there are so many inputs into it, they look kind of six months ahead. They can figure out what's going to happen in the future, especially the bigger markets.

Speaker 2:

It's very difficult for you to outperform the S&P 500, the FTSE 100, the Eurostox 50, these big markets that we look at. So we talked about volatility. What does that actually mean? What do you know? When we talk about volatility for clients, does it mean that their portfolio can go to zero?

Speaker 1:

Well. So volatility, I think, if risk-, if risk adjusted portfolios go to zero, um, you know, if they're investing in the capital market. Sadly, I think we've got bigger problems than our ices and our sips. Um, but what it means and I could give you the technical answer that you know, volatility ultimately is is is how an asset or a price of something moves from its, from its mean, it's its standard deviation from that, from that, from that line that runs through the middle ultimately. But the way we think about it is predictability. How predictable is this asset class? And as the volatility increases, so does the predictability decrease and that level of predictability ultimately increases over time yeah, you know.

Speaker 1:

I can say, you know with a fair level of conviction, that over the long term, you know equities were outperform bonds. What I couldn't tell you with any sort of certainty is whether equities are going to outperform bonds over the next 12 months. And, equally, what I can tell you is that bonds are going to be probably more predictable than equities. And because that correlation understanding is much greater. It means that if you build portfolios with volatility at the core, with predictability or risk at the core, you can create these very surgical buckets, these lanes that your portfolios can sit in. And I keep banging on about this, but I think it's so important to stress that, with a Hoxton 3, your balanced clients, what you want to be so sure about, and they want to be so sure about, is that when they're a 3, five years down the road, they're still a 3.

Speaker 1:

Irrespective of what's happened to markets because that is their attitude to risk and if they're in the right portfolio for their attitude to risk, what happens they tend to stay invested. And one of the only free lunches in there are a few, diversification being one. One of the only free lunches in investing is staying invested. Yeah.

Speaker 2:

Benefiting from is staying invested, yeah. Benefiting from longevity, yeah, agreed, longer. You know we keep hearing, this time in beats timing, absolutely all famous investors, from peter lynch to buffett to manga, to even you know more active managers like terry smith. All of them say it's good, long quality assets that you should be investing in, not trading, not jumping in and out.

Speaker 2:

That's you know, fortunately or unfortunately, where gains are made. It's actually relatively simple concept, but yet people get so caught up on news and trading and trying to jump in and out. They get caught up in this market noise which is, you know, which can be very concerning as an investor, it can be very concerned as a client, which we completely get, and that's where, as advisors, we add a hell of a lot of value. So vanguard, as you rightly have said, it had produced vanguard, uh, vanguard advisor alpha, which you and I've talked about, yeah, and 2.6 percent of the three percent on average per annum, they believe one and a half percent of it comes from behavioral coaching. So, in times like now, us sitting here as your advisor saying, do not panic, sell that.

Speaker 2:

And the second one which we're gonna come on to is on drawdown, which is 1.1% of that comes from helping clients understand what they should draw down from and when. And ultimately, our guidance comes from you, the investment manager. So, given where we are in the moment, given where we are at the moment and clients are looking to draw down from their portfolios, clearly you're not going to be selling, sell off the US equity portion of your assets. But you know what do you look at and what should they be thinking about when they come to drawdown? Yeah, for us.

Speaker 1:

This is, this is, you know, a conversation that you know goes in your hand in hand with good financial advice, and I think, again, the most important thing for this, in our view, is that clients are in the appropriate risk profile, because if you are, you are approaching retirement or you're heading into drawdown phase. What you don't want to be is in a portfolio of 100% equities that potentially could fall 15% or whatever it is, and then you have to crystallize those losses.

Speaker 1:

So making sure those assets are in the correct lanes is, once again, super important. The other thing is making sure that clients understand that if they are in an asset that grows over time, then it allows you to have affordable income in later life. So for us, often not always, but rather than trying to identify income yielding assets, we're looking for assets that can grow over the long term so that when you come to that drawdown phase of life, you have the ability to start drawing down sustainably and importantly, you know, rather than perhaps an arbitrary sort of x percent income product. You know, we know that people don't retire like that.

Speaker 2:

Yeah.

Speaker 1:

They might phase out their retirement, they might decide that they want to work again, they might have a lump sum of investments. There's a whole load of things to think about and I think particularly, you know, using tools and you know forward-looking analysis tools and you know, and income sustainability tools to help structure. That is super important. So, forward-looking analysis tools and you know, and and income sustainability tools to help structure, that is super important so forward looking for you as a business.

Speaker 2:

Next thing, where what's happening with pam over the longer term. What's the long-term plans for pam as a business?

Speaker 1:

great question so, um, I think when people get asked that question, there's a tendency to say we want to grow and we want to be huge and we want to run billions and we want to have offices all over the world, and I think that's fair. You know that's ambition and I think growth is very, very important. But I think growth needs to be sustainable. You know it needs to be scalable. You know there is no good if you're growing at a speed that means that the service that you're giving to your clients is falling. So you know we talk about the optimum rather than the maximum. So we don't have views that we want to be the biggest company in the world, but what we want to do is make sure that where we do things, we do them to the best of our ability, and this is, you know, this is continuing to develop our technology for our advisor clients so they can continue to communicate with their clients effectively.

Speaker 1:

There's this cheesy saying in the industry that informed capital leads to patient capital. If your clients know what's going on, they're less likely to sell, and if they're less likely to sell, they're more likely to benefit from longevity. Sell, yeah, and if they're less likely to sell, they're more likely to benefit from longevity. It's making sure that we continue to innovate, yeah, because companies that don't innovate ultimately stagnate and and that means they stop giving the service that they want. It's continuing to hire people within our business, both on a sort of client relationship perspective, who have a consultative approach to speaking to clients and helping clients and building with clients. But it's also making sure that the investment talent that we're bringing into the business continues to be top of the industry so that those products that we create for our clients can be, you know, just cost efficient, as we can make them and can perform as as well as we think they can. Um, so it's about growing. Obviously we want to grow, but we want to grow predictably and we want to grow, you know, with scale.

Speaker 2:

you know we want to be able to be scalable so you talked about innovation there, um, which was, which is great, and I know that that's true to your hearts because I remember Matt gave me a book called the Innovator's Dilemma. Exactly, right.

Speaker 2:

And he gave that to us. He gave that to me years and years ago Now. It must have been when you guys were, when it was actually when I first started Hoxton. So that's the CEO of Pacific Asset Management, exactly so, yes, so I know it's true to your heart, but are there any innovations or new strategies that you're particularly excited about?

Speaker 1:

yeah, so, there's a couple of things we're doing, um, one of which is, um, an efficient diversification product. Um, and we have a lot of, you know, passive products that sit within the traditional capital markets. You have passive equities, you have passive bonds, you have passive alternatives, but what you don't have is passive diversifying asset strategies, and when I talk about diversifying asset strategies, I'm talking about strategies that have little to no correlation with fixed income and equities. Typically, diversifying asset strategies have got a bit of a name of being sometimes expensive and sometimes not doing the job that they are asked to do, and so what we are creating is a solution that looks to be uncorrelated and to be low cost, but the way in which it's created has a much sort of more of a passive mindset. So it's about using rules-based investing to create diversified strategies, and really the kind of idea of that product is there's almost like a benchmark for alternatives or diversifying assets. You know, if you can't beat this strategy at the cost it is, then you shouldn't be running it. You know your diversifiers, basically, and so that's something that you know we're really excited about and that's something that's going to be coming pretty soon.

Speaker 1:

Um, the other thing is less. Well, there's lots of product. We're always talking about product and you know matt and he's always looking to find things yeah, valuable things that that are there for client. But we're not. And you know Matt and he's always looking to find valuable things that are there for clients, but we're not going to pump out product. We're about creating things that make sense for clients, ultimately.

Speaker 1:

But one of the other things I mean I know you guys are big on tech but another one of the things that we're looking at is how we can utilize AI within the technology framework of our solutions. So, you know, one example is we're working on a functionality called PAM intelligence and what that will allow financial advisors to do is to simply, you know, prompt, through a sort of genie, you know, and ask you know what's my portfolio done over X amount of time? What's my holdings within US equity? You know what's the fee of this portfolio for my client and get that information real time. So they've got a question from a client, it can come straight back. You know right away super interesting.

Speaker 2:

Yeah, yeah, exactly, and AI will definitely change the way that we all do business. I think so, yeah, and I think, I think for financial planning, it's going to be a massive enabler. It's going to manage clients to get a much better bespoke service, much more personalized, you know. Hopefully it leads to much better outcomes for them, um, which I'm sure it will do. I don't think it's going to replace, uh, financial planners or financial advisors, um, but yeah, we shall, we shall I agree with you.

Speaker 1:

I mean, I think you know we've seen those kind of robo advice, things sort of come and go. I think finance, financial advice it is, in my opinion, still oh you know, in the in a balance, more of a people business than it is a, than it is a data business. But I think without the data and without the real appreciation and understanding of how data can be used, you're not fulfilling the full solution yeah, 100 agreed.

Speaker 2:

So wrapping up now. Um, if you could leave our clients with one key piece of advice about investing in today's environment, I've got a good idea, but what would it be?

Speaker 1:

yeah, I think I think you know you could probably guess. I mean, I think it would be firstly, make sure you're in the right risk profile. I, I mean, and that is the job of your financial advisor. You know, our job at PAM is to try and eke out more returns than we can every year, you know, get those extra 1%, extra 2%. But really, when it comes to returns, the biggest decision is not whether you're, you know, pacific's balanced fund or someone else's balanced fund. Potentially it's whether you're a balanced or a cautious, yeah, or it's whether you're, you know, pacific's balanced fund or someone else's balanced fund. Potentially it's whether you're a balanced or a cautious, yeah, or it's whether you're a balanced or adventurous or an aggressive, or a one or three, you know it's that, it's that lane, it's being in the right lane for you, because what that allows you to do is, um, sleep at night yeah, you know it allows you to stay invested um, and really that is the most important thing.

Speaker 1:

Yeah, so that would be my and I know we've been gone about it, but I think that would be my right remaining business yeah and also, you know, just to and I think many, many people get that.

Speaker 1:

You know, you know these these days, people understand that markets sell off. You know we think about recency balance, but you think about, you know, in the last five years, we've had covid, which was one of the most extreme sell-offs in markets. We've had 2022, with Russia invading Ukraine and the inflation that came post that, and then record interest rates going up. We saw big sell-offs in markets and we've seen Trump and the insecurities or sort of the uncertainty of his administration, and what's that done for markets? You know, if someone invested in you in, you know, 2019, they'd still be up. Yeah, you know, despite these three massive events that we have, and so that my other thing would be you know those events happen. Yeah, they're part of life, they're part of markets. You just need to make sure you've got a good a financial advisor that can communicate with you.

Speaker 2:

They're happening slightly more frequently now, but, um, but, yeah, it's, yes, it's very, uh, very important to remain disciplined during uncertain times, agreed, yeah, yeah. And finally, for someone just starting out on their investment journey with hoxton and pam, what's one thing that they should always remember?

Speaker 1:

good question. Well, I think, firstly, if you're starting out your journey with Pacific and Hoxton, I think you've made a great decision. Joking, but no, in all seriousness, one of the hardest things to do is to start your investment journey. I mean, you guys probably know this better than me, but I think only 10% of the people in the UK take advice, which is a pretty terrifying thought. It's mad, isn't? I think that's right. Don't quote me on that, please. Everyone but I you know, which is crazy, seeing as the average life expectancy is, you know, somewhere in the late 80s. And if you're not taking advice and you're not saving and all this sort of stuff, it's, it's, it's quite, it's quite scary.

Speaker 1:

So I'd say, firstly, I'd say, you know, well done for starting that journey. That is probably the most important thing for that. But I would say, yeah, it's about keeping calm, it's about making sure that you have that goal. You know financial advisors is all about goals, setting goals, and lots of stuff happens in between those goals. You know, markets go up, markets go down, trump's come they, trump's go. But it's about making sure that you are aligned to that end goal and making sure that you hold us to account and your financial advisors to making sure that you're always aligned with that goal.

Speaker 2:

A hundred percent. It's goal based financial planning, which means you plan your finances around the lifestyle that you want to live, absolutely, as opposed to trying to react to markets, which is which is super important. To markets, yeah, which is which is super important. Look, that's been really, really useful. Thank you so much for making the time to come down and and, uh, treat our listeners to a nice podcast that they will enjoy. Um, and thanks very much and we hope to see you soon. Thanks chris, thanks hoxton, thank you.