This is one of those times when I want to take some shelter from my in-box. I want to sit in my bomb shelter with my eyes closed waiting to hear someone shout “Incoming” as another missile is fired in my direction from a client wondering why our asset allocated portfolios are trailing the S&P 500. I am a true professional who fully understands the return difference between the best-performing single category and a diversified portfolio of U.S. and international stocks, growth and value stocks, large and small stocks, and a variety of bonds, so my initial reaction to those e-mails is also professional—shame. After shame, my follow-up reaction is annoyance. When I am really on the top of my game, I swiftly move to fear.

When I take a few steps back, I realize that the client is asking the question for a host of reasons, probably the least of which is whether we know what we are doing. The e-mail really isn’t about me; it’s really about the clients wondering whether they will have the money they want to spend when they want to spend it. Or it’s about whether they are making good decisions about their future. Or it’s about their own feelings about overspending and how the markets need to bail them out. Or it’s about a fight they had with their kid or their boss or their spouse. So those steps back are important, because they allow us to refocus on the only thing that matters—the client.

I received one of those e-mails the night before I was going to be meeting with a client and, miracle of miracles, my immediate response was that this client is unnecessarily anxious and I want to help her again feel comfortable. A simple “I know what I’m doing and you don’t” would probably not be ideal, so this is how the investment part of the meeting went:

The first thing I did was thank her for bringing up how she felt about her returns, tell her I completely understood why she felt that way, and said she wasn’t wrong to feel so. I talked about how there are basically four quadrants of decision-making—good process and good results, good process and bad results, bad process and good results, and bad process and bad results. I thought that we were currently residing mostly in the good process, bad results quadrant, but we also spent time in parts of the other quadrants as well.

We believe in diversification, asset allocation and mean reversion, so our good process involved adhering to those principles in spite of external influences and pressure (some client feedback and underwhelming results) that could cause us to change. I thought that where our process was less than adequate was the degree to which we prioritized valuations over momentum, causing us to get a bit more conservative too early (to prevent our hubris, we allow only 5% variations from our investment policies up or down in any asset class). I said that every month, we review the trades we made to see how the investments we sold out of did in comparison to the ones we bought. This allows us to examine our processes and see what we can improve.

The client seemed visibly relieved for a number of reasons. First, she didn’t feel crazy or discounted. Her sense of discomfort was validated. Second, we acknowledged areas where we could have done better and that we were working on more clearly understanding how we could have done things differently. Third, we expressed confidence in our long-term strategies and affirmed that we have to give up returns in the best-performing category in order to create a higher probability that her goals will be met (as opposed to making big bets in any one individual category). We talked about determining what her spending can be (she is retired), factoring in a wide variety of markets and returns. Notably, she is going to be fine.

Clients don’t care what you know unless they know that you care. It is easy to get uncomfortable with something in the relationship and evade it rather than explore it. That may occasionally work, but it feeds into most of our worst fears and that of our clients—that we are actually imposters. The only way to have authentic client relationships is to be authentic. That means creating an environment where clients can talk about the messy things in their lives as well as their satisfaction or dissatisfaction in the work we are doing.

While we love being the hero by discovering errors or opportunities, what is more important to clients is our day-to-day consistency of building the relationship of trust and meaning. I recently went to the funeral of a client’s parents, and she said, “I’m not surprised you are here and thank you for coming.” That client knows she matters and believes I won’t let her down. My job is to uphold that. That is the definition of a client experience.

We build the client experience brick by brick. There are a few things that we need to get really good at in order to distinguish ourselves.

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