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,
We have had solid and steady performance on our portfolios for several years now. Our philosophy is to be caretaker of our clients’ money and help them make solid, incremental gains over time. It’s worked well for many years but now that the market is up significantly, our clients are asking why they aren’t seeing these gains in their portfolios. We do take the time to educate and we show them a blended benchmark so they aren’t measuring us against the S & P but what else could we be doing to give them comfort that we are acting on their behalf by not chasing returns?
Tom E.
Dear Tom,
This illustrates the downside of good news. When the markets go down we worry, but when they go up there is often a lot of media celebration and clients can tend to think they are missing out on something! Unfortunately, you can’t control the media, and you can’t control what your clients are exposed to outside of your firm.
You mention education, but I wonder if you are being proactive enough in talking to clients and helping them to understand how you allocate portfolios and why it is not an apples-to-apples comparison. If you have needy clients, or clients who often ask these questions (as I am inferring from your note), you might want to think about being extra attentive when there is any kind of market news. Investing is complex, and while you probably do explain what you are doing and why you are doing it, a check-in to talk about market dynamics, and how you are responding, could be helpful. Educational one-pagers or a webinar about performance measurement and benchmarks would be valuable too.
How much do you emphasize the planning aspect of wealth management, e.g., meeting or beating goals vs. a benchmark? This is another area to consider if you are offering financial planning in addition to investing. Full scale planning requires you to go beyond benchmark-relative considerations and analyze investing vs. life-goals. Perhaps you could remind clients of what you do and why it is differentiated. In my experience, advisors will often take for granted that their clients understand exactly what value they are bringing to them. Even clients who are happy with you and have been with you a long time need to be reminded!
Is there any truth to what your clients are saying? How often do you review your investment approach to ensure the choices you are making align with the IPS of a particular client? If you haven’t done a formal, or semi-formal IPS you might want to consider instituting this with your clients. It would allow you have a document to refer to with the client whenever having investment discussions.
I understand your frustration and can glean how much you believe you have tried to address this issue, but I always wonder whether there is more an advisor could be doing.
Clients are often intimidated by what they don’t understand so there is no “going overboard” when it comes to sharing information and education in a proactive manner.
By Beverly Flaxington, read the full article here.
