The Questionable Wisdom of "If It Isn't Broken, Don't Fix It"

May 30, 2018

Keywords: Insurance Asset Management, Investment Advisor, Asset Management, Investment Management, Client Focus, Investment Consulting, Outcome Oriented Approach

This expression is used in countless ways, including in the investment industry.  “If the portfolio isn’t broken, why fix it?” Although it sounds like wisdom, where would we be today if the great inventors of the past had adhered to that adage?

If the ancient Mesopotamians never invented the wheel, life today would be rather stationary.  If the ancient Chinese hadn’t invented paper, if Guttenberg hadn’t invented the printing press or Edison the incandescent light bulb… well, this would be written on a leaf by candlelight.  Fire, the wheel, optical lenses, the compass, electricity, the steam engine, the internal combustion engine, the telephone, vaccinations, cars, airplanes, penicillin, semi-conductors… the list could go on and on.

So is “if it isn’t broken, don’t fix it” really sound wisdom?

Another question for investors today:  How do you know if your investment strategy and approach is indeed not broken?

It’s critical for investors today to understand what they own and why they own it. Further, they should understand how the portfolio is contributing to their desired outcomes to ensure it actually is contributing. Unless one fully understands the power of the investment tool box and how to utilize those tools, the traditional investment approach may indeed be broken.

In simple terms, investors have relied upon Modern Portfolio Theory to manage their portfolios along an efficient frontier for many years.  Over the last ten years, however, this has become increasingly difficult even for the savviest investor.

For insurers, this is all but impossible due to the unique challenges and the many restrictions and regulations in the industry.  Insurers also have any number of different business objectives. Unfortunately, the typical approach in asset management is a product focus, and traditional asset allocation models may fall short in meeting business objectives.  It’s imperative the portfolio is thoroughly reviewed to ensure it isn’t “broken”.

At Miles Capital, we came up with a better solution – a way of managing insurance assets to help drive business success that we call, Objectives-Based Asset Allocation®.  OBAA® is a forward-looking insurance based approach to help meet investment goals and address essential company needs. Miles Capital has built a distinct competence in designing and delivering these solutions for insurers for over 30 years.


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