Overcoming Bad Performance

By Beverly Flaxington

March 4, 2014

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Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues.  To submit yours, email us here.

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

Dear Bev,

Our investment strategy did not fare well last year and we lost ground to competitors. We’re on the defensive with clients, which makes it hard to have any growth discussions. We have corrected our approach and are on track for much better performance for 2014. Any tips to get our clients to believe in us and stay with us until the turnaround?

Neil K, Southeast


Dear Neil,

Have you positioned yourselves with clients as purely an asset manager? It’s always troubling to me when financial advisors or wealth managers gets stuck defending performance, unless they are marketing only that. If your client know that you have a well-rounded service offering, investments are only a small part of those services and you are keeping them on track to meet their goals, this should not be such a focus.

So to that end, please review your marketing material and your approach. Are you “selling” performance? If so, you will be beholden to it. If clients have come to your firm relying on your past performance, assuming it has been strong, they will definitely be looking for it every quarter or every year. If you know your style goes up and down with certain market movements, you should explain this to clients clearly and in advance. In addition, be proactive about explaining your poor performance to investors. Tell them why you performed the way you did and what you are doing to capitalize on better performance this year. Explain the difference in your approach versus other competitors. If there is some way to show “value” in your investment style, separate from the actual performance of last year, spend time educating clients on this. Be much more active with your client education in good markets and in bad.

If you are not investment-only, review your messaging and your client approach. Implement a more robust client engagement opportunity that isn’t limited to portfolio performance. Remind clients of their goals and objectives and show them how they are still on track, assuming they are. Have conversations throughout the year on a variety of topics, so that sitting down once a year to review poor performance doesn’t become a focal point. It seems simple to say, but putting a proactive and ongoing emphasis on the relationship will often carry an advisor through turbulent investment times. If the trust is there and clients believe you are doing more than just finding the best investment opportunities for them, they will give you more leeway for a blip or two in the road. Of course, if the blips continue and you start to trail your competitors by a wider margin, it may require revisiting your overall investment process, too.

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