Quarterly client letter poll: Where do you put performance?

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Performance is an important component of quarterly letters to asset management clients, so I wasn’t surprised to hear the following question at an investment commentary workshop: “Where should you discuss performance—at the beginning or end of your quarterly letter?”

Here is what I think:

  • Either spot can work but your placement should be consistent from quarter to quarter. This lets your clients know where you answer the question of “How am I doing?”
  • It’s good to relate performance to your market commentary no matter where you place your clients’ performance.

Below are the results of a poll I conducted. Placing performance at the beginning of the letter was by far the most popular choice.

Performance placement poll results

Need hands-on help with your commentary?

I can write your commentary based on interviews with your investment professionals or based on attribution analysis and other materials provided by you. I also edit commentary you’ve written to make it more compelling and reader-friendly.

If your budget is limited, hire me to evaluate your newsletter and suggest improvements that you can implement yourself.

 

Note: On January 28, 2014, I deleted the poll and replaced it with a screenshot of the poll results.

Guest bloggers: 2013 in review

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I’m thankful for the knowledgeable and talented professionals who have contributed guest posts to my blog this year.

Here’s a list of guest posts, with links to the bloggers’ websites and Twitter accounts.

Blogging

Communication

Marketing

Writing

 

I also hosted some wonderful guest bloggers last year. See “Guest bloggers: 2012 in review.”

The FVP — The Fee Value Proposition

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Communicating fees to clients and prospects challenges many advisors. After an interesting LinkedIn exchange about fees with advisor Richard Rosso, I asked him to turn his comments into a blog post. I hope you’ll continue the conversation in the “Comments” or on social media.

The FVP – The Fee Value Proposition
By Richard Rosso, MS, CIMA®, CFP®

If you ask a sample of advisors how they created their fee schedules and positioned them to the public, you’ll hear many different responses. Clients are sensitive to our fees – even more so after the financial crisis of 2008. According to a recent study conducted by Invesco Ltd, surprisingly, the word “fees” drew twice the rate of negative responses compared to the word “commissions,” when investors were surveyed.

I have four suggestions for communicating to prospects and clients the value of your fees.

1. Convince yourself. If you’re not truly convinced the partnership, guidance, and  relationship you provide are worth what you charge, you can’t passionately and straightforwardly converse about your fee structure with others. Each week, I write down three ways I’ve earned my fee, usually on a client-specific basis. I’m very tough on myself, too. I then input notes in Redtail (our CRM provider) so I may follow up on an issue or concern when a client least expects it. The key is to delight my clients so they appreciate what I offer.

2. Value first, fees last.  At times, I’ll be asked about fees even before I’ve had a chance to understand what a prospective client is seeking in a financial partner or if there’s even a fit. With those who are “fee obsessed,” it’s best to acknowledge the question – don’t avoid it. Then state how you will clearly explain fees once you have gained a better grasp on what’s important. Focus on open-ended questions and provide specifics regarding value you can provide. Frankly, prospects who begin with “fees first” are not a good fit most of the time.

3. Convert strengths into differentiators. Create a strong, clear value proposition. In his book, Stop Asking for Referrals, Stephen Wershing, CFP®, writes of converting strengths into differentiators through “Measure, Manage, Master,” which is what I practice. Don’t try to reinvent the wheel, just make sure your wheel has strong treads and gains traction when it counts.

It’s one thing to say you provide “good service.” It’s another level entirely to outline specific service objectives. Written standards are measured, managed (to make sure they’re followed) and mastered by responsible parties.

Our creation of an overarching, eleven-rule list of client deliverables, titled “The Vision Prism,” to complement our two levels of standards, reflects accountability to those we serve. Everyone at the firm must commit to The Vision Prism and sign the written promise. It’s clear: If you can’t commit, you can’t be part of the team.

Clients receive copies of our standards and are encouraged to hold us accountable. It’s one thing to say “you return phone calls quickly.” It’s another to place in writing “you will receive a returned phone call within three hours” and stick to that mandate. That’s how you justify fees charged.

4. Watch your language. Your words and delivery are important. If you don’t believe in your fee schedule, it’ll come through in your voice. If you can indeed deliver on your promises, then be confident. Also, I like to use the word “investment” when describing a fee. The fee is a client’s investment in the relationship, answers to planning questions, proactive communication of relevant issues, avoidance of behavioral pitfalls and financial education for them and their family members.

Try to keep it simple. Our fee is a percentage of assets under management charged quarterly. That’s it. We get paid by the client.

Investors are seeking greater value from their advisers along with a clear understanding of services provided.

No matter how you decide to structure fees for your advisory firm, what’s important is the message, the transparency and the value behind the numbers.

____________

Richard Rosso is Senior Financial Adviser for Clarityfinancial, LLC based out of Houston, Texas. He is the author of the book Random Thoughts of a Money Muse, a cutting-edge, pop-culture and sometimes funny look at money and the real story behind financial dogma.

How to help your clients help their aging parents

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Your clients’ communications with their aging parents can have a big impact on their peace of mind as well as their financial plan. A family meeting is one way to improve communications, as described by Bob Mauterstock of Gift of Communication in “Breaking Down the Barriers: Helping Your Clients Help Their Parents” at the annual conference of the Financial Planning Association of Massachusetts on May 16, 2013. As a financial advisor, you can help clients by suggesting they organize a meeting. You can even facilitate the meeting, said Mauterstock.

The family meeting can break down the generation gap and the communication gap, said Mauterstock. Your clients and their parents may not find it easy to talk. Parents belong to a generation where emotions or money weren’t discussed. They may also shun the online communications favored by younger generations. Face-to-face communication may work best for them.

Family meeting participants

The family meeting should take place face-to-face and involve both aging parents and all of their children, said Mauterstock. Don’t leave out anyone. You’ll probably find that one child is the alpha child, most trusted by the parent. In an interesting twist, Mauterstock, who is an only child, looked to his wife as their “alpha child,” needing her endorsement of his suggestions.

Also involve a facilitator as a neutral party. When financial advisors act as facilitators, they can be heroes to their clients, said Mauterstock.

Family meeting agenda

Start with values, not valuables, in your family meeting, advised Mauterstock.

Be aware that aging parents want to maintain control over their lives. Tread carefully. Anything that threatens control will cause parents to shut down.

Start with the parents’ emotional issues. They are wondering:

  • How will I maintain control over my life?
  • How will I be remembered by my children and grandchildren?
  • What do I want to get done whether I’m alive or not?

Other topics for discussion include legal, healthcare, and financial issues as well as the details and location of other key information.

Other resources

Mauterstock is the author of Can We Talk? A Financial Guide for Baby Boomers Assisting Their Elderly Parents. He blogs at www.parentcareplanning.wordpress.com. Among the books in his extensive resource list was David Solie’s How to Say It to Seniors.

Lesson from sales training

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Marketing that focuses on the client, not the seller, is the most effective. The following story, told by Dave Dyer about his training as a rookie salesman supports this point.

The trainer said that you should assume that the prospect you are talking to is saying to himself “What’s in it for me?” during your presentation.  Then, we had a class exercise where each salesperson had to do a presentation to the rest of the class while all the other students interrupted him with comments like, “Who cares?  So what? What’s in it for me? Why should I care about that?”

As you can imagine, the students had lots of fun giving every presenter a hard time and the lesson sure stuck with me.  The product is not important; the prospect only buys what he thinks the product will do for him.

Before you brag about your firm, services, or products, you’d do well to consider this lesson.

If you like how Dyer tells stories, check out his latest book, Steel’s: A Forgotten Stock Market Scandal from the 1920s.

Reader challenge: How would YOU answer this challenge to client trust?

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Ways to grow and retain your clients’ trust were the focus of Richard L. Peterson’s presentation to the CFA Institute’s Wealth Management conference on March 22, 2013. One of the methods he mentioned was “writing or forwarding articles for clients’ benefit,” which his firm’s research found was also associated with higher rates of business growth. This activity is even more important when market volatility strikes.

Peterson said that you should prepare things to say or written content to forward when market gyrations rattle your clients. List three things you’d use, he suggested.

I imagine that some of you don’t have anything at hand. On the other hand, even the best-prepared wealth managers may be wish to learn from what their peers have prepared. These thoughts prompted me to write this challenge for my readers.

What’s on YOUR list for easing client fears about volatility?

Let’s start a conversation about this topic. Please use the “comments” area below to identify content that would be useful to share during volatile times. You can share something that you’d say, an article you like, or even mention one of Carl Richards’ Behavior Gap sketches that you might use.

If you’d like to learn more about the overall wealth management conference, see my conference notes or the CFA Institute’s social media highlights.

Speak your clients’ language in reports, urges Fortigent’s Welch

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Wealth managers’ performance reporting is “shockingly bad,” said Scott Welch, Fortigent’s chief investment officer in “Talk Your Walk: Client Reporting in a Goals-Based Framework,” his March 21, 2013, presentation to the CFA Institute’s Wealth Management Conference.

Reporting is more important than you think

Welch cited statistics showing that reporting is important for both high net worth and institutional investors. On the institutional side, where the statistics are more straightforward, the following ranked among the top 10 service-related drivers of client satisfaction:

  • Clarity of investment reports
  • Timeliness of investment reports
  • Reporting capabilities of website

Even more impressive was Fortigent’s experience with reporting, as reported by Welch. He discussed a case when his firm had, for example, $2 million of a $10 million portfolio, but provided consolidated performance reports on the $10 million. Within 24 months, his firm routinely captures 100% of assets in cases like this. The ability to offer advice on the entire portfolio is unbeatable, he said.

Use behavioral finance in reporting

Welch suggested that advisors take advantage of the lessons of behavioral finance. You should redo your reports in a way that speaks to the way that clients think and feel.

With clients who have enough wealth, Welch suggested dividing their portfolios into goals-based buckets and reporting performance by bucket. Welch’s pyramid, adapted from the work of Ashvin Chhabra, starts at the bottom with a layer of Personal Safety/ Minimum Wealth/ Lifestyle Maintenance, followed by Market Participation, and topped off by the Aspire level. He also described the Aspire level as “This is money you can roll the dice with.”

Some advisors tell clients they they’re managing their assets to achieve goals, but then they give clients performance reports organized by accounts, not goals. If you’re doing that, you’re not really delivering goals-based investing, in Welch’s opinion. “All you’re doing is you’ve slicked up your sales presentation,” said Welch. Instead, you need to make your reports align with your clients’ goals. This would be easy if each account were dedicated to one goal, but that rarely happens. Still, there are technology solutions out there, said Welch, although he did not name names.

Part of the solution involves adding another level of categorization to data. Go beyond security and asset classes to use super-classes in line with the pyramid’s three levels, suggested Welch.

The benefits

Use goals-based reporting to communicate and you’ll have better, deeper conversations with clients, said Welch. This will also improve your client retention.

 

 

Email vs. call vs. meeting with clients

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Should you email clients or use some other form of communication?

In my opinion, it depends on client preferences, the nature of your communications, your strengths as a communicator, and your schedule. My thanks go to @Tbmanning who raised this issue in response to my question about email challenges for advisors.

Ask for client preferences

Ask your clients what type of communication they prefer. It’s great service to provide information in the manner they desire. Of course, if you have many phone-loving clients, this may not always be practical.

Consider the nature of the communication

The flurry of advisor phone calls during the 2008-2009 market downturn reflected the importance of “live” interactive communications about serious topics. On the other hand, you can’t get a form signed on a voice call, so send the form electronically or pull it out in person.

Play to your strengths

If you’re a smooth talker with horrible spelling, grammar, and punctuation skills, then you should favor the phone. On the other hand, if it’s hard to raise your voice above a whisper, go for written communications.

Work with your schedule

I know advisors who have 300+ clients or are so highly scheduled they can’t communicate until late at night. If you’re one of those advisors, you’ll need to favor emails or U.S. mail more than your peers.

YOUR tips?

If you have tips on picking the right form of communication, please share them in the comments.

 

Image courtesy of David Castillo Dominici / FreeDigitalPhotos.net

Your investment performance reports are failing you

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Sending inadequate performance reports to your firm’s clients can hurt your client retention, says Philip Lawton in Middle Office: Managing Financial Institutions in Turbulent Times. 

Too many numbers is a common flaw. Clients also need narrative explanations, says Lawton. In my experience, some people can quickly grasp the significance of a chart or table. Most people will benefit from explanation, especially an explanation that highlights the most important data.

Charts that are “busy and unattractive” are also a problem, Lawton says. He suggests that you hire a graphic designer to work with your performance analysis to fix this.

“…over time, ill-designed reports and poorly delivered explanations may damage relationships and erode trust,” concludes Lawton.

Jan. 22 comment by Philip Lawton:

It’s hard to get performance reporting right, but seeing it—and helping compliance officers see it—in the context of client relations can make a difference. Retail clients may be relatively unsophisticated, but institutional clients are typically very busy, and both need clear, meaningful communications. Performance reports must, of course, be complete enough not to be misleading, but too many numbers tend to elicit too many words of explanation; the result may be frustration and, ironically, incomprehension. That’s not the desired outcome!

Marketing communication notes from #fpaexperience

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Here are some highlights from sessions I attended at FPA Experience 2012, the Financial Planning Association’s annual conference, in San Antonio, Texas. You’ll notice my notes focus on marketing and communication, even when that wasn’t the speaker’s focus.

Client engagement, according to Julie Littlechild

Truly engaged clients are the clients who will refer business to you. While 84% of clients in Advisor Impact’s surveys say they are comfortable making referrals, only 2% provide referrals to people who actually make it into your office to meet with you, said Julie Littlechild, CEO and founder of Advisor Impact, in her presentation on “Cracking the Code: Tactics That Drive Engagement and Growth.”

The best and most frequent referrals come from clients who see someone with a need for financial advice that you can meet. At least this is how I interpreted Littlechild’s words.

Littlechild got me thinking that consistently blogging about a financial challenge specific to a narrow target audience is a good way to guide referrals. Your blog helps your clients identify the problems you’re best at solving. Plus, your blog posts will boost your credibility with your new prospects.

For more on research by Advisor Impact, see Littlechild’s article, “4 Ways for Advisors to Better Engage Clients,” which originally appeared in the October issue of Investment Advisor magazine.

Tailor your written communications, says Zywave CEO

Advisors are missing opportunities to deepen their connections with their clients, according to Jim Emling of Zywave in “Expanding Your Firm’s Potential with Compelling Communication.”

Advisors need relevant content delivered at the right time via a medium that will reach clients, said Emling. This is a common sense approach that isn’t often practiced, he added. This is a big issue for advisors’ Generation X clients. More than 40% of them are less than “very satisfied” with current communications from their advisors, according to Emling.

Here are some of Emling’s ideas for boosting your communications:

  1. Send communications driven by life events like having a baby — When Emling’s wife had a baby, he “never heard a peep” from his advisor.
  2. Send a series of communications focused on specific client goals, such as managing a problem with debt.
  3. Send communications that go into more detail on new ideas introduced in meetings — Emling had no idea what ILITs were when his advisor introduced them in a meeting. He would have appreciated a follow-up explaining ILITs in writing.
  4. Figure out your clients’ pain points so you can focus your communications on those topics.
  5. When you target younger clients, you may also need to target different referral sources.

By the end of October 2012, Emling’s company is launching Advisor Briefcase, software to help advisors deliver targeted communications.

Engaging women in money discussions

The need to engage your clients and prospects ran through many of the sessions I attended at FPA experience. I was intrigued by Elizabeth Jetton’s discussions of the need to find better ways to empower and engage women. Jetton is a co-founder of Directions for Women.

Engage women with you, so they can see the value of your guidance and you can increase their financial literacy and well-being, said Jetton. She uses circle gatherings of five to 20 women and conversation cafes of larger groups to foster interactions where everyone, even an expert, shares stories.

During her discussion of these techniques, Jetton made some comments that relate more broadly to communications:

  1. Stories help people learn. When a story is told, the whole brain focuses.
  2. Don’t ask people to process more than three to four pieces of information at once.
  3. People use their guts to select you as their financial advisor, and then they rationalize it.
  4. Clients like to hear advisors’ stories and to know that you’re human and imperfect.

I think #3 speaks to why blogging, social media, and showing some personality in your writing are so important.

In case you’re interested in learning more about circles, either Jetton or Directions for Women plans to publish an e-book, Guide to Circle for Advisors.

FPA Experience through my eyes

Here are more of my blog posts inspired by FPA Experience: