Managing Client Expectations

Saturday, November 10, 2012 02:33
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Managing Client Expectations

Tags: client communications | client education | client loyalty | client satisfaction | communication

Sometimes it is appropriate to remind ourselves of best practices. This article will address one of these: managing client expectations. 

 
Our clients are jumpy. They've endured the huge downturn in 2008 and have seen their portfolios shakily edge upwards over the last several years. When there is a decline, clients worry that it signals the beginning of the end.

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We know that the market will go down, just as we know the market will go up. We just don't know when - and trying to predict is futile. So, how can we help our clients deal with volatility? I believe that it takes communication - in quarterly letters, emails, meetings, seminars or webinars. Advisors must make the effort on a continuing basis to educate clients. It is only through education that our clients will be able to ride out the market ups and downs without panicking. 
 
What topics should we repeatedly instill?
 
   * Long-term investing
   * Asset allocation
   * Tax management
   * The importance of financial planning
 
How and what you present to your clients is up to you.  Showing clients that their allocations are maintained doesn't mean much to them. Showing them the amount of tax savings generated does as does showing them how diversification helps to protect against extreme downslides. 
 
The bottom line is that ongoing client communication works. In my practice, I don't get panicky phone calls or requests to liquidate when the market slides. My clients are more likely to ask me why they see equity holdings in their IRAs (because their IRAs represent a disproportionately high percentage of their portfolio and thus we need to put some equities in IRAs) and when was the last time we rebalanced or harvested tax losses. 
 
These clients are engaged, committed and appreciate the extra value we bring to the table. It's definitely worth the proactive effort. 
 

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