Invest for the long term. Always have a long time horizon. It’s sensible advice, but some clients are either unresponsive or don’t even open their account statements. You would think the 2007 Financial Crisis would have cured them of this bad habit! As their advisor, what can you do?
“Why should I care?” you ask. There are plenty of reasons. They might assume they have delegated portfolio management to you, their advisor. Unless you have been granted discretion (which almost never happens) you need their authorization to make changes. More important is the outcome that if something serious goes wrong, they will wonder why you never told them!
You need to be proactive in getting clients to pay attention to their portfolios.
- The scheduled review. You make a big deal about getting it on the calendar months in advance. You send reminders by e-mail, text and phone calls. You confirm a day or two beforehand. One of my clients, a banking executive remarked: “I really appreciate that you get me to stop what I’m doing and focus attention on my portfolio at least once every year.”
- It’s all about you. You’ve seen this one before. You are preparing an agenda for the meeting. You contact the client, asking what items they want to add to the agenda. Suddenly it’s not about just talking numbers, it’s finding cash for their child’s wedding.
- Feed them. Working in the firm’s headquarters has it’s perks. One is the executive dining room on a high floor of the office tower. The setting is spectacular. The service is attentive. The menu was great and surprisingly inexpensive, since it was an inter department expense. After a good lunch, we returned to a conference room near my office. No fancy dining room? A good restaurant near your office should get the same reaction.
- Document everything. We trust our advisor. They do a fine job. If changes need to be made, it’s easy for her to call. A few years ago, we would get calls to schedule a review. I would say: “No, we don’t need one.” I later realized that every review offer that was declined became part of our client record. If a problem ever develops and the client says: “Why didn’t you tell me” it’s easy to go back to the record and show the multiple times the advisor tried to get in touch.
- Benign neglect. You’ve heard the story of the guy who jumped off the Empire State Building. As he passed the 20th floor heading down, he said: “So far, so good.” An excellent advisor I met communicated the same message in a relevant way: “Your portfolio is ideally positioned for the market cycle we just left.” Their portfolio did well, but things have changed.
- Quote the time lapse. This is also a good way to remind them of the high level of service you provide. “It’s time for my monthly call to check in and see if anything has changed in your situation.” This reminds them you are in contact monthly. This approach can also be used as: “It’s been almost two years since out last portfolio review…”
- Cash on vacation. Interest rates are incredibly low. Your client had a bond called or Treasury Bill mature. Letting them know and mentioning the free cash is earning almost nothing can create a need to focus attention and take some action.
- The wealth report. Portfolio reviews sound boring. “You are going to tell me we are overweighted here and underweighted there.” Yawn. If things are going well, your client might not see the need to focus their attention. A wealth report is a different story! Suggesting a comprehensive review to see how much you are worth now, the likelihood you will outlive your retirement assets and considering “what if” situations like retiring early – that should get their attention. The portfolio review can be included too.
- Use their preferred channel. Some clients like to visit your office. Others want you to come to them. Some are OK with an audio call via phone. Others prefer a video call. Find the channel that’s most agreeable to your client and suggest it.
There are many ways you can persuade clients to focus attention on their portfolios. If they won’t you can still document your efforts.