The Best Way to Communicate New Investment Approaches

January 13, 2015

by Beverly Flaxington

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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.

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Dear Bev,

After many years of research, we recently changed our investment approach. We are slowly moving client portfolios to the new models, taking care to minimize negative impact. As senior management, we decided against broad messaging because we believed it would cause more consternation on the part of our clients. We therefore haven’t widely communicated the new approach. Some of our advisors think this is sneaky and disingenuous. Do you agree with our decision or should we be telling our clients exactly what we are doing and why?

Pat D.

Dear Pat,

I am going to assume that the new investment approach and this disagreement are relatively recent developments. My answer to your question might be different if the change happened long ago.

You can communicate the new approach to clients and be both positive and informative about it. You could construct a professional communication via letter or email and prepare “story” lines for your advisors to use in conversations with clients. I have three suggestions:

  1. Talk positively about the change. Explain how the markets change, the industry changes and in response you are always watching and evaluating what’s happening. Explain that you don’t take changing your investment approach lightly and have been evaluating it for several years and have decided that the timing is right to make the changes.
  2. Explain what the changes are – have you moved from a reliance on mutual funds to an ETF approach? Have you changed managers in a fund of funds portfolio? Have you created a new filtering system to assess and evaluate individual securities? Take a few sentences to help your clients understand what you are doing and why. It’s okay to get a bit technical here but don’t overdo it. You want them to understand what you are doing, but not scare them with the level of detail.
  3. Perhaps most importantly, explain how this will impact their personal situation. Let them know that you are carefully evaluating each and every client portfolio to create a plan that will work best for their situation. Explain the importance of minimizing capital gains and taxes and maximizing opportunity. Let them know there is a schedule for transition and that each advisor can speak with their clients about how it will specifically impact them.

If done well, this could be a very strong communication and could position your firm as forward-thinking, investment experts seeking to do the right thing by clients.

I welcome other advisors who have been through a similar change to write in and tell us how their firm handled the situation.

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