RD Heritage Co-Founder Dr. Robert Davis Explains What it Means to be a Hands-on Investor
In ordinary parlance, hands-on investors are those who pay more attention to their portfolio compared to hands-off investors, who delegate this task to an advisor (or an automated system). However, as explained by Dr. Robert Davis, the co-founder of RD Heritage, in the formal financial management lexicon the difference between hands-on and hands-off investors is far more significant and consequential.
“Hands-on investors are not just more interested and attentive to their various holdings and opportunities,” commented Dr. Robert Davis, whose firm RD Heritage is a partnership of five family offices and their portfolio of diverse investments in food, real estate, pharmaceuticals, medical devices, biotech, solar energy, as well as the exploration and production of oil and gas. “They leverage their large stake in a company in order to make key decisions regarding strategic direction and setting priorities. They are literally rather than figuratively hands-on and play a pivotal role at the highest level in how a company runs.”
Typically, there are two scenarios in which investors opt to take a hands-on role. The first scenario is when investors are dissatisfied about the vision or decision-making of current management, and as such feel compelled to adopt a leadership position. The second scenario is when investors are not necessarily concerned or alarmed about current leadership, but nevertheless conclude that due to their combination of experience and competence, they are best equipped to take the reigns.
The Benefits
“Hands-on investing offers several important benefits for family investors,” commented Dr. Robert Davis, who prior to launching RD Heritage spent 10 years as an ER, Ambulatory Care Physician, and locum tenens physician in rural communities across the country. “It enables families to focus and direct their respective investments in specific areas of interest or expertise. It also facilitates structured and organized succession planning, which helps ensure that future generations are educated and equipped to contribute to decision-making and planning at the appropriate time. Furthermore, families are empowered to design investing strategies and structures that are more aligned with estate planning, governance and taxation.”
Of course, hands-on investors must be more than legally entitled to make executive decisions. According to Dr. Robert Davis, they must have extensive experience, proven competence, and the seasoned ability to align short-term decisions with long-term vision.
“Some new and inexperienced hands-on investors quickly find themselves in over their heads, and instead of establishing clarity and cohesion they unleash chaos and conflict,” commented Dr. Robert Davis. “The most critical thing to remember is that choosing to become a hands-on investor cannot be triggered by an ego trip. It should only be about diligently, faithfully and intelligently doing what is best for the company in terms achieving clearly-defined objectives and goals.”
Notably, the goals and objectives that Dr. Robert Davis refers to include — but are not exclusively defined — in monetary terms. For example, in addition to having profitable endeavors, RD Heritage’s partnerships of family offices believe in the power of capital markets to solve critical and pressing economic and social challenges, and ultimately improve lives.
“The vision of maximizing capital growth and contributing to improvement of individuals and communities are not mutually exclusive endeavors” commented Dr. Robert Davis. “On the contrary, it is certainly possible to achieve both of these aims. Effective, experienced and collaborative hands-on investors pay a central role in facilitating this outcome. There is no need to choose profits over people. Socially responsible investing, when it is envisioned, managed and optimized properly, is both morally worthwhile and financially rewarding.”
