How Should Financial Planners Explain Quarterly Results To Clients? Does Providing Quarterly Performance Reports Undermine Your Clients’ Ability To Keep A Long-Term Investment Perspective? Hot

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The perspective of your quarterly performance reports should be focused on long-term trends. Just because you are reporting quarterly does not mean your focus should be on quarterly or 12-month trends. Instead focus on long-term trends to subliminally reinforce to clients the discipline smart fiduciaries apply when managing money.


For example, the video above, and an article that goes with it and gets posted on advisor websites, focus on diversification. It shows how combining different asset classes worked well over the past five years. By discussing current trends over a five-year period, you illustrate that short-term ups and downs usually little effect over long term. You make it easier for clients to stay attuned to what’s important and ignore the “noise" and emotion of the  markets. By explaining asset allocation and systematic investing techniques, in the context of this past quarter's performance, you align clients with your views. By continually training clients to resist reacting to short-term volatility, you will improve their long-term results and can better justify your fees. 

As simple as buy-and-hold broadly diversified portfolios may be, sticking with a long-term plan is not easy. Remember the market crisis five years ago (almost to the day)? It was difficult to tell clients to stick with their investment policy statements when everyone thought there was a 50% chance that the world financial system could collapse. Five years ago today, if you had pulled out a client’s IPS and read it to her and told her to “stick with the long-term plan,” you may have been laughed at or punched. Worse still, you may have lost the client.
Humans have an almost comical predilection for acting based on short-term financial events. We are influenced so much by the recent past that we miss seeing the long-term picture. It’s a simple mistake but people make it over and over. Why? Financial psychologist Mary Gresham says humans are naturally made to flee from financial uproar because our brains are hardwired to run from danger. She says people have been trained over tens of thousands of years to flee from threats, beginning with cave-men running from lions and tigers and bears. Since humans have not faced financial threats for tens of thousands of years, we are ill-equipped to manage financial crises. We react like cave men.
Because we are instinctively flawed by a fixation with avoiding the risk that comes with the volatility and instability inherent in investing, advisors need continually to reinforce a long-term perspective with clients. Financial planners need a system that combats the bad behavior. 

A New Approach: Quarterly Reports In Video

Advisor Products, which makes advisor websites, content, and tech tools for advisors since 1996, has for many years produced a "Quarterly Market Summary." It's provided to advisors as a Word document and PowerPoint presentation, so RIAs can use it to accompany the quarterly portfolio reports they send to clients. Advisors can also use the text and charts in print and email newsletters, in-person presentations with clients and prospects, blog posts, and social media content, etc.  


Starting with 2Q2013 quarter, I'm making the Quarterly Market Summary available as a 10- to 15-minute video for $400 a year. (We continue to offer QMS as a slide presentation and Word document for $1200 a year). You can post the QMS videos for clients to view in AdvisorVault's "Share" folder or in a Dropbox, Box, SkyDrive or other file-sharing system. This video is especially important if you present your reports to clients electronically.  If you're sending clients reports quarterly and they're not opening them, you're obviously not connecting with them. That's not good. And if you are sending them and they are opening them, then you want to give them more information than just a statement. An educational video based on long-term investing and broad diversificatoin is easy for clients to understand. Video is easy to consume.


In addition to presenting the QMS videos to clients to put performance in proper perspective, you can post these quarterly videos as a lead-generation report for prospects to view. If you ever hope to succeed in online marketing, you will need to provide prospects with content. The quarterly performance reports might be subscribed to by a prospect for a year or two, or even longer, before that prospect will seriously consider hiring you. It's drip marketing but the tools have changed to suit the Internet.


Keep in mind, the quarterly market update videos are just one element in a content stream that you need to produce and share on social networks. We strongly recommend you post a blog at least twice a month that you write, or you might prefer to speak into a camera about issues your target markets need to know about and post those videos to your blog. Point is, the quarterly market updates and other content from Advisor Products are a complement to your blog.  To succeed in content marketing and search egnine optimization, you need create your own content by producing blog posts regularly. But you'll need to create a lot less content if you use our videos and articles as part of a content marketing strategy.


The Quarterly Market Update Videos are produced based on research from Fritz Meyer, an independent economist. Meyer's a brilliant analyst and provides monthly advisor educational webinars that CFPs, CIMAs, and CPWAs can attend for continuing professional education credit, and we hope to be spporved for CPA CPE soon.


The approach we're executing is likely to set a new standard for quarterly performance reporting by RIAs.     




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