MitonOptimal is a specialist discretionary fund manager (DFM) with a 25-year track record of managing multi-asset, multi-manager portfolios in line with defined financial objectives. Our group includes MitonOptimal Holdings, MitonOptimal Portfolio Management (FSP No. 734, Category I & II), and MitonOptimal South Africa (FSP No. 28160, Category I & II). We operate within the boundaries of advice-driven mandates, ensuring investment implementation remains anchored to well-documented financial needs analyses (FNAs) and strategic asset allocations (SAAs).
PURPOSE OF THE REPORT
This report provides an objective assessment of long-term investing principles, particularly in the decumulation phase of retirement planning. It highlights the importance of adhering to a long-term investment strategy based on a properly conducted FNA and risk profile. The report further examines how behavioural biases—by either investor or advisor—can potentially undermine financial outcomes if deviations are made without corresponding changes in the client’s circumstances or formal revisions to the financial advice framework.
LONG TERM INVESTMENT DISCIPLINE
Financial plans that target income and growth—such as those structured through living annuities—are inherently long-term in nature. These portfolios are designed to deliver sustainable withdrawals while preserving capital over multiple decades. The strategic asset allocation (SAA) implemented for such objectives typically balances equity exposure (for growth) and income-generating assets (for sustainability).
Market fluctuations are an expected feature of long-term investing. Historically, equity markets have shown resilience over time:
- The JSE All Share Index (Total Return) has not experienced a negative rolling 5-year nominal return since 1960, based on total return data including dividends. While this does not guarantee future outcomes, it underscores the value of maintaining long-term exposure to growth assets even through market cycles.
Moreover, research by asset managers such as Ninety One (2025) affirms that:
“Living annuity investors require exposure to growth assets such as equities to ensure a sustainable pension income. De-risking before or during retirement is generally not prudent.”
These insights reinforce the view that long-term plans should not be revised in reaction to short-term volatility—unless such changes are supported by a comprehensive reassessment of the client’s financial situation and risk tolerance.
BEHAVIOURAL BIAS AND INVESTMENT DEVIATION
One of the most significant risks to a long-term plan is behavioural bias—emotional responses to market events that lead to irrational investment decisions. Behavioural finance refers to this as “behavioural tax”, the opportunity cost resulting from actions such as panic selling, market timing, or abandoning equity exposure during downturns.
Empirical studies have demonstrated the consequences of this behaviour:
- Ninety One’s 2025 “chaser portfolio” analysis shows that re-allocating into the previous year’s best-performing asset class consistently resulted in the lowest long-term returns.
- Russell Investments’ Value of an Advisor Report (2024) found that up to 40% of an advisor’s value-add stems from behavioural coaching, helping clients avoid costly decisions driven by fear or short-termism.
- DALBAR’s QAIB studies repeatedly show that the average investor underperforms due to timing errors rather than poor asset class selection.
These findings suggest that deviation from a well-structured investment plan should only occur following a valid change in the client’s financial position, objectives, or risk profile—formalised through a revised FNA and advice record.
CLARIFYING THE ROLES: ADVISER VS. DFM
Adherence to a defined financial plan is supported by a clear division of responsibilities:
Financial Advisors:
- Conduct and update financial needs analyses
- Establish appropriate risk profiles and time horizons
- Draft records of advice and define strategic asset allocations in line with investment objectives
- Provide behavioural coaching and periodic reviews
Discretionary Fund Managers (DFMs):
- Implement portfolios in line with the agreed SAA and mandate
- Manage asset allocations and risk exposures based on process and market fundamentals
- Do not advise clients directly or modify strategy without instruction from the advisor and client (authorised mandate)
- Avoid reactive changes not grounded in a revised mandate
The integrity of the investment process relies on this separation. DFMs maintain the discipline required to achieve long-term objectives, while advisors maintain the contextual understanding of the client’s evolving financial circumstances.
FRAMEWORK FOR STRATEGIC REVIEW
To maintain consistency and avoid reactionary decisions, changes to the investment strategy should only be considered under the following conditions:
- Material changes in the client’s personal or financial circumstances
- A revised risk tolerance or time horizon assessment
- A formal update to the FNA and record of advice
- Clear documentation of the rationale for any strategic asset allocation change
Absent these conditions, any tactical portfolio shift based on market sentiment or short-term bias risks undermining the long-term outcomes initially planned for.
CONCLUSION
A disciplined, advice-aligned approach to long-term investing remains the most robust strategy for meeting retirement income and growth objectives. Portfolio decisions should not be influenced by short-term market events or subjective biases—whether from the investor or the advisor—unless substantiated by a reassessed financial plan.
As a discretionary fund manager, MitonOptimal maintains a disciplined process rooted in long-term outcomes. We execute portfolios based on the financial advisor’s instructions and do not alter strategic allocations without formal justification. Our role is to provide implementation consistency, risk-aware management, and transparency through all market conditions.
SOURCES AND REFERENCES:
- Ninety One. Taking Stock: Autumn 2025. https://ninetyone.com
- Russell Investments. Value of an Advisor Report 2024
- DALBAR. Quantitative Analysis of Investor Behavior (QAIB), 2023
- S&P Dow Jones Indices. SPIVA South Africa Scorecard
- FTSE/JSE All Share Index total return data (via IRESS and ASISA databases)
George Dell
Executive Director – Discretionary Fund Management
The content of this article is for information purposes only and does not constitute an offer or invitation to any person. The opinions expressed are subject to change and are not to be interpreted as investment advice. You should consult an adviser who will be able to provide appropriate advice that is based on your specific needs and circumstances. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable and given in good faith, but no representation is made as to their accuracy, completeness or correctness. MitonOptimal South Africa (Pty) Limited is an Authorised Financial Services Provider Licence No. 28160, regulated by the Financial Sector Conduct Authority (FSCA) – Registration No. 2005/032750/07.MitonOptimal Portfolio Management (Pty) Limited is an Authorised Financial Services Provider Licence No. 734, regulated by the FSCA – Registration No. 2000/000717/07.