Month: December 2009

Healing Client’s Concerns

The financial market’s turmoil over the past year has certainly put a damper on the investing public’s collective psyche but it has been equally damaged by what seems to be an unending wave of investment frauds perpetrated by the Earl Joneses, Madoff’s and Sandford’s of the world. Clients remain fearful of falling victim to the next investment fraud. Justified or not, they are second guessing everything, including the trust they place in their advisors. It is this potential legacy of deceit that will cast a pall over the wealth management industry unless we all stand up and hold ourselves accountable in the eyes of our clients.

Clients are making changes as they re-evaluate their relationships. We all know you cannot un-ring the bell on change but being proactive is not an onerous task; it simply entails following tried and true approaches:

  • Communicate: there is nothing more important than client concerns. If their advisor isn’t reaching out to them, someone else will. This is a great opportunity to understand clients’ thoughts and fears, as well as to confirm that their goals still align with their investment strategies.
  • Checks & Balances: regulators are working to protect investors. Unfortunately, regulators sometimes fall short. Unsavory characters can take advantage of these shortcomings to pull off their schemes. What clients need is reassurance. They want to know that independent auditors are monitoring their investments and confirming the accuracy of their results. Establishing the reputation of counterparties in clients’ minds helps to alleviate customer unrest. Transparency in all its forms, such as viewing account holdings online, fee clarity, detailed performance information and full counterparty relationship disclosures all help clients understand their situation and demonstrates that risk mitigation is possible.
  • Diversification: plain old portfolio diversification goes a long way toward lessening the consequences of crooks and the ruined invetments they leave in their wake.
  • Concentrated mutual fund or equity positions also leave clients exposed to significant potential financial damage.
  • Independence: investors should be concerned if an investment advisor has a propensity for filling portfolios with sub-optimal investment choices that enrich the advisor but saddle the client with real dogs. By selecting from different sources, clients can be sure their portfolios are unbiased.
  • Due Diligence: spend time upfront ensuring that you are satisfied with the quality of the investment products. Clients must trust that the services being offered are best for their own personal situation and nothing else.