Surveys of couples usually find that poor communication is the biggest reason for divorce, and what’s true for marriage is equally true for advisory relationships. Eight in 10 advisors surveyed by Natixis Investment Managers believe that not communicating frequently enough with clients is the single most important reason they lose clients. That’s far more than too-high fees or failure to meet expectations for returns.

As markets and investing become more complex, communications between advisors and their clients takes on critical importance. Professionals need to work harder than ever to educate their clients about how their goals align with their personal circumstances, risk tolerance and the broader context of the financial world. When done right, these interactions can help set context for market events and portfolio performance, and help temper expectations, something that can improve prospects for long-term client retention.

It’s no surprise that nearly four out of five (78%) financial advisors say client communication is the top skill that those surveyed advisors need to improve in order to better serve their clients.

While advisors need to maintain regular communication with clients, the best opportunity to level-set expectations is during review meetings, Whether held quarterly, semiannually or annually these meetings focus clients on their investments which can help them more fully concentrate on what their advisor is telling them.

But given constraints on time and attentiveness, what should advisors be discussing during the client review to ensure the most effective and useful communications? Here, too, the Natixis survey offers some clear guidance.

Among those surveyed, advisors say there are five critical topics to cover in a client review meeting if they are to ensure sound communications and to maximize understanding of the client’s priorities.

1) Discussing performance relative to client goals: Evaluating portfolio performance is, of course, one of the main reasons for having a client review meeting. Yet the review shouldn’t simply be a recitation of data. It is essential to set the context for the discussion, starting with the broader market performance and continuing with specifics of the client’s own portfolio – especially within the framework of the balance between risk and return.

2) Reviewing health and family changes: A client’s personal situation can change regularly and affects everything from risk tolerance to performance needs and expectations to what types of financial products the client needs – life insurance is critical for a young family, much less so for an older empty-nester. While many clients often will volunteer information about their life situation, advisors need to probe gently for changes that may be difficult to discuss, such as a pending divorce or an unexpected birth in the family.

3) Assessing overall market environment/macroeconomic conditions: Setting the context for future performance is never easy: Nearly half (47 percent) of advisors say that the biggest mistake individual investors make is having unrealistic return expectations, second only to making emotional investment decisions. Accordingly, the vast majority (83 percent) of advisors say that managing client return expectations is “important” or “very important.” The client review meeting is the place for such discussions, with a look ahead at what can be expected given current and forecast conditions being an indispensable part of the meeting.

4) Reviewing plan assumptions: The basics of the plan – everything from financial goals to risk tolerances to investment timelines – needs to be reviewed periodically to ensure they are properly aligned. Such crucial assumptions need to be analyzed, discussed and fully agreed upon in advance of the development of an updated plan.

5) Engaging with clients to better understand personal values: A discussion focused strictly on performance could burry what actually guides client financial decisions – their values. With the emergence of ethical investing, impact investing and the various permutations of environmental, social and governance (ESG) criteria, it’s important for advisors to understand how their clients’ beliefs can direct their investment decisions, especially with regard to the choice of funds. Today, investment analysis has reached the point at which almost any belief or preference can be accommodated, and advisors who understand this can provide more options and better choices to their clients.

Advisors who focus on the human dynamics of the client relationship will complement their skills in investment analysis and other technical areas, and provide a level of service that will engage and retain clients. The first step to building a better relationship is through improved communications throughout the year but especially in client review meetings. Advisors can start by looking at the steps above and incorporating them into their own client relationships.

— The above survey results came from Natixis Investment Managers' "US Survey of Financial Professionals," conducted by CoreData Research in March 2018. It included 300 financial advisors.

Dave Goodsell is executive director of the Natixis Center for Investor Insight, a research program dedicated to the analysis and reporting of issues and trends important to investors, their financial professionals, money managers, employers, governments and policymakers. Under his leadership, the Center for Investor Insight has conducted more than 30 in-depth research studies since 2010, encompassing insights from more than 70,000 investors in 30+ countries. For more information, visit: https://www.im.natixis.com/us/research.