3) Articulate your investment strategy often. Ensure you communicate clearly and cogently to the client your rationale for your actions. Even if they don’t ask; especially if they never ask. Silence is often misread as understanding or consent. Instead, it’s often a sign they are either unsure or asking someone else. The best case is they trust you. Remove all possible doubt. Repeat your investment process or philosophy to your clients at every turn. If there are dramatic shifts in the markets, major political events or new elements to your investment platform, use these as opportunities to communicate with your clients and reinforce their understanding of your strategy. This will keep your clients—and you—from jumping from one idea to the next, and will help to solidify your clients’ understanding of why they are working with you in the first place.
While you’re doing so, include a recitation of the value-added benefits clients receive in addition to your asset management services. Remember, those who live by performance will die by performance, and in today’s world of low-cost robo-advisors and low- or no-fee investment platforms, it is not always easy to outperform other options that are readily available. But as long as your clients recognize the comprehensive value of your full-service offering, they will not be so easily distracted by the next bright shiny thing beyond your practice.
4) Invest in proper technology. Managers need to be able to generate and implement investment ideas quickly, accurately and in a scalable manner. All investment managers should leverage, and not be stingy in selecting, technology tools that serve three critical functions: trading, analytics and performance reporting.
Modeling and rebalancing tools help execute large-scale changes or small updates at the account level, across a group of accounts, or across your entire book. Trading systems also improve execution while minimizing errors. Today’s rebalancing tools are sophisticated, leveraging equivalencies, exclusions and “sleeves.” Though no two accounts may look exactly alike, advisors enjoy the benefits of trading multiple accounts with similar attributes. Smart technology harmonizes customization and model management.
Analytical technologies help identify areas of concern as well as areas for opportunity. Portfolio managers should be able, at a glance, to locate accounts outside a client’s risk tolerance, accounts over or under allocated to a segment, concentrated or volatile positions, and more. Proper analytical tools can illuminate an advisor’s overreliance on a particular security or when maturity dates present new opportunities.
Lastly, managers should utilize the best possible performance reporting tools and ensure the integrity of their output. Performance figures can be invaluable educational tools for investors; they can help define progress toward goals, articulate the benefits of diversification and more. Regardless of whether or not clients see detailed performance reports, reps as portfolio manager need an unbiased means to evaluate their level of benefit (call it alpha) to investors against realistic benchmarks. The oft-quoted stat, “80 percent of managers underperform their benchmarks,” gives reason enough for an advisor to look herself in the eye and validate her effectiveness. If the numbers don’t add up, it is time to determine if day-to-day asset management might be left to third-party providers who can achieve the similar or better results on a more consistent and less time-consuming basis.