Meet Robert: Fed up with the noise, this adviser has a few secret weapons – Livewire Markets

As a first-generation Australian, and having grown up in a household that was not so fortunate financially, Robert keenly knows the importance of financial independence and wealth.

It's what saw him study business at university, later applying for a job at NAB within its Private Wealth business. But after nine years with the bank, Robert realised that money doesn't buy happiness.

In 2015, he launched his own practice,Baharian Wealth Management and, over time, has developed a love for quant-based investing and ETFs.

While he uses active strategies for his clients' fixed income exposures (there just aren't short-dated floating-rate ETFs available yet, he says), Robert has given up on active investment management within equities - having sold out of his last active equities exposure - in the Magellan Global Fund - around 12 months ago.

In the second edition of our new series Meet the Adviser, Robert lays it all on the table and shares the ETFs that both he and his clients use for long-term success, as well as how the financial advice industry needs to change to better serve Australians.

Why did you choose this profession and how did you get started as a financial adviser?

Im a first-generation Australian and grew up in a household that was not so fortunate financially.

I was about 10 years of age, and I distinctly remember sitting at McDonalds with mum in Doncaster. Its closed down now the BMW Doncaster showroom sits there now. To this day I remember precisely where we were sitting, and I asked her, Mum, which job makes the most amount of money?

I went through high school studying business, economics, and commerce I couldnt get enough of it, I loved it. From here, I knew I wanted to be involved in investing. At university, I studied financial and risk management a deep dive into financial academia. I loved it so much that I began my search for an entry-level job. I landed one at NAB working during the day and completing my studies at night school. I also started a business or two during this time.

And since this realisation, I feel like my job is not only to manage peoples money but to also help them articulate and gain clarity on the purpose of their money. What is it that they are really searching for? I feel like my job is far deeper than just the money. And this is what gives me great joy.

What do you believe makes you different to other advisers in the industry?

I believe our industry is really about relationships. Being genuine is super important. Yet being comfortable being yourself can be really hard. There are so many expectations of what someone in our industry needs to look like, how they should speak, act or just be. Ever since starting Baharian Wealth Management, I have never felt freer to speak my truth. I feel like I can be absolutely open, transparent, and truthful to people.

I think I look at relationships more deeply. I feel the process is more personal now - beyond the money. Sometimes this backfires, there are folk who dont want this, and thats ok too.

I also have a hard time trying to sell an idea to a client if I genuinely cant convince myself of it Im not a very good liar. I think people can sense your conviction when you truly believe something.

Can you share a bit about your process for building portfolios and selecting investmentproducts?

It all starts with the purpose and intention. What is it that we are trying to achieve and why? Deciding whether were going to take the car, train, or plane without knowing where we are going is kind of pointless.

We then design the asset allocation to support these goals and priorities. How much risk can one tolerate? How much risk can they take? How much risk should they take? We spend a lot of time and undertake a lot of work to understand risk tolerance, capacity, and risk required.

When it comes to equities exposures, we use ETFs and rules-based funds. I think of market-cap-weighted ETFs as momentum strategies - you are buying the companies that are going up, and selling those that are going down. I know people think that's "buy high, sell low", but there is a lot of evidence supporting the momentum factor as a persistent investment strategy.

Currently, our fixed income exposure is slightly different. Our fixed income exposure used to be made up of index-based exposure, which in hindsight worked extremely well for us and our clients.

As a result, we decided to use PIMCO as our manager of choice for our "core" fixed income exposure, both in Australia and globally. What we really liked about this was that it was a quasi index exposure with the ability to dial-up and down the duration, with certain limits - so it couldn't blow with the wrong call. I guess it was the rules we liked.

We then complement this exposure with managers such as Realm, which manages our Australian credit, and Bentham, which manages our international credit. Further to this, in circumstances that allow, we further diversify in private real estate debt which is unlisted and provides a great source of income. I think this is an asset class that is very misunderstood by traditional equity and fixed income folk.

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Managed Fund

PIMCO Australian Bond Fund

Australian Fixed Income

Managed Fund

PIMCO Global Bond Fund

Global Fixed Income

Managed Fund

Bentham Global Income Fund

Global Fixed Income

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Can you share two of your go-to funds with us?

This gives our portfolios an excellent starting point as a core exposure. We would typically allocate around 10-15% of our clients total portfolios to this ETF. A dirt-cheap, globally diversified portfolio of assets. The management fees on this ETF are 0.18% per annum.

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ETF

Vanguard MSCI Index International Shares ETF

Global Shares

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The days of having to pay a fund 2% to gain exposure to a global quant-based strategy are long gone. We can now access these strategies via a cheap, systematic, listed instrument. We have increasingly been allocating to this ETF over the past 12 months. The management fees on this ETF are 0.35% per annum.

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ETF

BetaShares Global Quality Leaders ETF

Global Shares

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How do you discover new managers and investment opportunities in a market saturated withproducts and issuers? What makes a manager stand out?

This is part of the problem and challenge for investors. There is always so much going on. Its like visiting a Las Vegas casino. Where the heck do you even look!? The colours, the bright lights, the noise, its enough to make you go nuts.

And for this reason, I think it is imperative that advisers and investors have a very clear investment philosophy and methodology. We have a very clear investment strategy, one that is based on evidence, which cuts out about 90% of the noise.

A pitch deck from a fund manager arrives in your inbox, what happens next?

To be brutally honest, not much. It depends on where it came from. If it's completely unsolicited, its generally deleted. If it's through a contact or my network, Ill always look at it. Ive never met a manager whose fund has underperformed their chosen benchmark. And so, I think its super important that we kick the tyres internally. Well run the fund through our internal software and give it a test. Generally speaking, theres a lot of good marketing in our industry. My starting point is always a sceptical one, and so it takes a lot to convince me otherwise. Ill always ask myself, 'Would I invest my personal money into this thing?'

We also have clients bringing opportunities to us. Weve invested in some PE and VC deals this way. Theres a lot of "who you know" that plays a key role in those asset classes, I think.

How would you describe your personal investment strategy?

Great question. I compartmentalise my portfolio to align with my personal goals - its very structured. I have real estate because I wanted it to satisfy a need. I didnt have a view that real estate was going to outperform.

I dont hold any defensive assets. Im too young. I dont care what happens in the short term. Id happily ride volatility and illiquidity. So, Im all in for risk. The task for me, however, is how do I break down the risk within the risk.

I touched on this earlier, but running businesses have a higher degree of risk, and so I have a portfolio of liquid investments that are made up of global listed investments that I believe are lower risk.

What are the top three holdings, in percentage terms, in your personal portfolio and can you tell mea bit about why you hold each of these positions?

Its a clean, simple and cost-effective way to gain exposure to the Australian market with some factor tilts that have generated consistent alpha. This fund is an actively managed quant-based fund, which provides index-like returns, but with a little more alpha and without human bias.

It acts as my global anchor, and I can build exposure around this core holding.

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ETF

Vanguard MSCI Index International Shares ETF

Global Shares

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This sits alongside my VGS exposure and concentrates on the biggest and the best 100 companies around the world. I think this is one of the cheapest products in the market and a great momentum strategy.

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ETF

iShares Global 100 ETF (AU)

Global Shares

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Could you tell me about your worst investment? How did you deal with this falling position orfund?

Will my wife see this? Where do I start? The RAMs IPO (acquired by Westpac in 2007), Murchison Metals (acquired in 2014), Zip Co (ASX: Z1P), the list goes on. Ive lost hundreds of thousands of dollars in the past, taking the advice of brokers, picking the next winner, or just having FOMO. Ive learnt a lot from these experiences, and I think its helped me become the investor I am today and a better adviser to clients. Although I bought Bitcoin in 2021 at, I think, precisely the top ha!

What conversations are you most frequently having right now with clients? And what is youranswer to these questions?

Im quite proactive with our clients. I write to them weekly. This gives me an opportunity to provide a point of view on whatever is making headlines at the time. It means we generally address any market-related queries proactively without our clients wondering what this means for them. Having said this, the most topical questions we are receiving are:

My response: Of course, we will. Will it be in the next 12-18 months? Maybe, who knows. History tells us we have a recession, on average, about every 3-4 years. And they last around 18 months. Since WWII however, we've gone an average of about 5 years without a recession. The last one was less than 24 months ago, and the one before was almost 15 years ago.

These things never play out on averages. In fact, the average return in the stock market is about 10% per annum. However, the stock market has returned 10% per annum in only a handful of years. Youre more likely to experience a double-digit loss in a given year than a return thats close to the long-run average. And more than one-third of all years have seen a gain of 20% or more.

History says there's a 37% chance of a recession in the next 18 months. The real cause of the recession won't really be known until after the fact. Even then, well, we may never know what really caused it. Just like the stock market, averages are averages because that's what they are. We also know they dont last forever.

Youve got cash to help fund expenses/Youve got time on your side to see this through and you dont need the funds.

When we look at the data, we see that geopolitical events unfold all around the globe far more frequently than what is perhaps originally thought. What is obvious to me after seeing the data, is that the long-term impact on financial markets is almost non-existent. Here are some of the facts:

From this, we can deduce:

The challenge this time around for markets is that they were already trying to deal with inflation and higher interest rates coming off the back of a stellar few years in the market. Although some aspects of the data surprised me, others didn't. The obvious one is the market's ability to evolve, adapt, improve, and grow, even in the face of adversity.

The challenge for us as investors is to look beyond the now. By the time you and I can react or respond to the news, the market has probably already priced in the information. It does it pretty quickly and pretty well.

What are the most common mistakes you see in the portfolios that you inherit and how do you go about fixing them?

Great question. The mistake is only my point of view of the situation. Im sure there is always a good reason for certain holdings or the way the portfolio was designed. I would say the portfolio has just been managed differently.

Its an education process, and it takes time. Early on, as a young university student, I spent years looking at financial research, speaking to brokers, and losing hundreds of thousands of dollars betting it all on stocks. I remember when I was 23, a broker convinced me to invest in the RAMS Home Loans IPO. After the stock fell 80%, he called me and tried to convince me to buy more, because Westpac was taking the company over. That was the straw that broke the camel's back, so to say, and got me interested in a rules-based methodology.

I spend a lot of time going through facts, figures, and evidence. I try and present this data in a simplified way. Eventually, when clients see the data, they make decisions themselves. I think part of what Im here to do is to empower people to make confident and thoughtful decisions with their money.

If you could change one thing about the industry so that it can better serve Australians, whatwould that be?

Wow. This is a tough one. Just one? I feel like our industry and profession is treated with little respect by regulators. I feel like advisers are like rag dolls being pulled in all sorts of directions. Rules come in, and rules get thrown out. More rules come in, then get thrown out.

We need simplification, not more complexity. Rant over.

Can you share a personal passion or ambition you have for your future?

I run a company called The Good Company. Its a profit for purpose food company. We use profits to help fight poverty and hunger around the world with our partnership with The Hunger Project Australia. Id love to be able to contribute to human consciousness and global change, albeit in a very small way. Its been running for around six months, we have some products in retailers around Melbourne. You can check it out here.

I quit my corporate job to spend more time with my family, and ironically, have ended up starting two new companies afterwards. Its really important for me to spend quality time with my family and explore new places during holidays.

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Meet Robert: Fed up with the noise, this adviser has a few secret weapons - Livewire Markets