In the course of your career, you have probably read many articles about what prospective clients are looking for in a financial planner. But what happens when the tables are turned? What does the ideal client look like for the typical advisor? Below are four key attributes that make a client a joy to work with.


A financial advisor cannot accurately predict which fund or asset class will be the best performer each year, and reasonable clients don’t expect soothsaying. They aren’t angry with their advisor when a diversified portfolio includes some losing investments each year. Let’s face it, if advisors knew which asset classes would perform best, they wouldn’t recommend diversifying in the first place.

A client’s investment portfolio will not have above average returns each year. The average annualized return of a diversified seven-asset class equally weighted portfolio that includes stocks, bonds, real estate, commodities and cash averaged a return of about 10.1% over the past 45 years (1970-2014).

In that four-and-a-half-decade period, the return exceeded 20% some years (1975, 1976, 1980, 1983, 1985 and 2003). In those good years, the enjoyable client did not crank up his expectations, somehow believing now that returns would continue at more than 20% year after year.

Likewise, in the past 45 years, there have been some discouraging years, when diversified portfolios yielded negative returns: -5.38% in 1974, -3.41% in 1990, -5.51% in 2001, -1.57% in 2002 and -27.61% in 2008.

But outstanding clients don’t suddenly lose faith in a diversification strategy because of a few stubs of the toe (or even a broken toe).

A diversified portfolio turned a $10,000 investment in 1970 into more than $764,000 by the end of 2014 (not adjusted for taxes or inflation). In contrast, a $10,000 investment in T-bills (in other words, a money market fund) had an ending balance of $94,030 45 years later.

If a portfolio design is based on long-term performance expectations, you must give it time to show its stuff. The variation in the year-to-year returns of a diversified portfolio can be large: from -5.38% in 1974 to +20.18% in 1975, and from -1.57% in 2002 to +25.22% in 2003, for example. Remember, there is often a very nice upward bounce after a year with a negative return.

The most reasonable way to measure the performance of a diversified portfolio is over five- or 10-year periods. From 1970 to 2014, a diversified seven-asset portfolio never experienced five years with a negative annualized return. (There were 41 rolling five-year periods from 1970 to 2014.)

Among 10-year rolling returns (there were 36 of them during the 45-year period), the average 10-year annualized return was 10.88% for a diversified portfolio. The lowest 10-year annualized return was 4.99% (1999-2008).

That’s pretty impressive considering that a portfolio consisting only of large-cap U.S. stocks (as measured by the S&P 500) had two 10-year periods with a negative outcome: a 10-year average annualized return of -1.38% between 1999 and 2008, and -0.95% between 2000 and 2009.

Enjoyable clients don’t pull up the daisies to see how the roots are doing. They understand long-term investing is measured in years, not months.


Enjoyable clients (and successful investors)discipline themselves. This is exhibited in two key ways.:
Adequate savings. A well-designed retirement portfolio has to be adequately fed. Unfortunately, investing 5% of annual income just won’t get the job done.

A reasonable goal is for a client to have a retirement nest egg that is equal to 12 times her salary in her final working year. An investor who starts a career earning $35,000 at age 30 and experiences a 3% increase in salary each year should have a retirement nest egg of $1.15 million (roughly 12 times the final year’s salary) by the age of 65.

Someone who invests just 5% of her annual income would have achieved that 12-times goal only 7% of the time during the 55 rolling 35-year periods between 1926 and 2014, assuming the saver was investing in a diversified 65/35 portfolio consisting of 40% large U.S. stocks, 25% small U.S. stocks, 25% bonds and 10% cash.

If, however, the investor deposited 8% of her income each year into a retirement account, the success rate would have been 65%. Better yet, an annual savings rate of 10% of annual income led to a success rate of 96%. Best of all, an annual savings rate of 13% achieved a 12-times retirement nest egg in every rolling 35-year period from 1926 to 2014 — a success rate of 100%.

Systematic rebalancing. Disciplined clients understand the need for regular rebalancing of their portfolios.
In the past 89 years, a diversified four-asset portfolio (large-cap stock, small-cap stock, bonds and cash) rebalanced annually had a higher ending balance about half the time compared with a non-rebalanced, four-asset portfolio (as measured over 80 10-year rolling periods from 1926 to 2014).

Some might think that rebalancing isn’t worth it because it only produces a better outcome in half the cases. But during the last 25 rolling 10-year periods, from 1990 to 2014, a rebalanced portfolio led to a better outcome 60% of the time.

Rebalancing demonstrates the sound investment philosophy of sell high, buy low. The disciplined client looks for opportune moments to invest in asset classes that are on sale, and accomplishes that through rebalancing her portfolio.


There is only one performance benchmark that makes sense, and that is whether a portfolio is moving toward specific goals on schedule.

Smart clients understand this, and they understand that this is achieved by using a diversified multi-asset portfolio.

A diversified portfolio is designed to help an investor achieve her financial goals over a defined period of time while reducing volatility as much as possible.

Enjoyable clients understand that portfolios can be more or less volatile based on the design. If the client has opted for a more conservative investment portfolio, she should understand that it confuses her advisor when the muted performance of a lower-risk portfolio is compared against the gains of the stock market or a specific mutual fund with different risk characteristics.


Enjoyable clients have balanced lives. This is not meant to imply that these clients don’t face challenges.

But these clients tend to focus on the things that are going well, rather than the things that are not. They focus on progress, rather than distance from the goal. In short, excellent clients have a balanced perspective on life that acknowledges challenges and struggles, but with an overriding spirit of optimism and courage.

Another valuable trait of optimal clients is that they express gratitude. “Gratitude,” Aesop said, “is the sign of noble souls.” We are motivated to do more when our efforts are met with thanks.

The same principal applies to advisors. Enjoyable advisors thank their clients for the good work they are doing. If problems occur and a course correction is needed, an advisor-client relationship that is grounded in gratitude is far more likely to survive.

This life balance I’m referring to is akin to the harmonic balance that we all should seek, much like an orchestra, which might have far more violins than tubas. In spite of the disparity, the music produced
is balanced.

Clients who become overfocused on the daily performance of their portfolios are likely to be less enjoyable clients. Exemplary clients recognize when they are out of balance and do what is needed to rebalance their lives, just as we rebalance a portfolio.

Enjoyable clients may not be the most talkative or perky people; they may not send their advisors holiday cards or invite them to play golf. Rather, they will have a healthy life balance, will be reasonable in their expectations, disciplined in their behavior and will measure success in ways that pertain to their own specific objectives and goals. That’s better than a day on the links.     

Craig L. Israelsen, a Financial Planning contributing writer in Springville, Utah, is an executive in residence in the personal financial planning program at the Woodbury School of Business at Utah Valley University. He is also the developer of the 7Twelve portfolio.

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