How To Discuss Portfolio Performance With Clients

No one wants to lose money. When the stock market is volatile portfolios often suffer. Meeting with clients to review their accounts is important to do on a regular basis. It might be tempting to put it off, hoping the picture will improve. If it doesn’t, the conversation becomes more difficult. How can you report on performance when the news isn’t good? The same way you would report in good times.

  1. You initiate the meeting. This is important because it demonstrates you are proactive. You are giving their account attention. You are not in a reactive state, when the client has called you in an upset mood. Ask if there are specific topics they want to address.

  2. Try to meet in person. This worked for me, but geography can be an issue. If you can, meet face to face at a location convenient for the client. Today, you can access client data remotely so you aren’t tied to your office. Since I was an advisor in the firm’s headquarter office in New York, I had access to the firm’s executive dining room or at least several good restaurants in the World Financial Center area. Lunch might follow the review.

  3. Always have current data. Reports should be printed as close to the meeting data as possible. They might be based on the previous month’s statement balances. Also check out the current day’s prices. Your client will have access to the same data.

  4. Talk in simple terms. Portfolio reviews are often thick, computer generated documents with many Compliance disclosures. The detail is so granular, your eyes cross. Clients can lose interest or feel you are hiding something. I liked to explain: “This is where we started the year. This is where we are now. This is how much you added. This is how much you pulled out. This is how we did.”

  5. You rarely win against an index. Clients follow the major stock market indexes. Even if you had an index tracker fund, you would still underperform because there are some costs involved. You might be a good stock picker, but that opens up the question, how much risk are you taking. Your client will expect you to address indexes. Do not stop there.

  6. Try to measure performance vs. goals. Your client has goals defined in their financial plan. This often involves retirement. You know the return you need to achieve to ultimately reach your goal. Measure performance vs. that number. I’ve hears a New England advisor call it “The Family Index.”

  7. Is your client 100% invested in equities? Probably not. They are likely allocated across stocks, bonds and cash. Measuring portfolio performance vs. the S&P 500 index isn’t a fair comparison. Find an index representing bonds, another for cash and calculate how the indexes did in the same percentage allocation as your client’s portfolio. This may show they suffered less damage than they thought.

  8. Talk about winners. If you recommend induvial stocks, chances are some worked out, even in the gloomiest market. Point this out to clients. Congratulate them on choosing those stocks or thank them for following your advice. Most investors are inherently optimistic. They look for good news. Provide some.

  9. How much risk did you take? You should have a chart provided by your firm that shows how much risk is in your client’s portfolio. This may show you have performed relatively well while taking less risk than the overall market carries.

  10. Provide direction. Investors work with advisors because they want advice. Share the firm’s views of where they think the economy, markets and interest rates are headed. Strategically, how should the client be positioning themselves looking to the future?

  11. Talk about rebalancing the asset allocation. Because stock prices change every day, the allocation is never exactly aligned. You might have a threshold of a few percentage point variation before you recommend taking action, but now you are conducting a review! This should be addressed.

  12. Ask for more money. You have ideas. Share them. Explain you like everything they currently own. These ideas require fresh cash. Stop talking. See what happens.

  13. What questions do they have? Have you addressed the points they raised when the meeting date was set? Do they have any other questions?

  14. What new services would you like to introduce? Does your client know about your lending services? Do you handle insurance? In what other areas can you help your client? These can be introduced gradually, so you don’t overwhelm them?

  15. When is the next meeting? Your doctor does this when you get a checkup. They schedule the next appointment. This makes sense and it demonstrates accountability on your part.

  16. Is there anyone else you can help? Your client should feel you are paying attention and treating them as an important client. This is a good time to ask for a referral.

It takes a lot of work to get prepared, but business often flows from these meetings. Referrals might follow. You are building goodwill too.

Related: It’s Who You Know, Not What You Know