As advisers, one of our many responsibilities is to anticipate and help manage our clients’ behavioral risks. We are here to help them avoid making poor decisions based on short-term market fluctuations that could derail their longer-term plans. We understand that our clients’ goals should be driving their financial plans, and that investment performance is just one of the levers used to help attain those goals.

We may say things to clients such as, “Focus on the long-term, turn off CNBC and don’t listen to the noise.” It does not help that, today, more clients than ever have access to Wall Street noise via the internet or other mediums.

For advisers who strive to provide comprehensive wealth management rather than investment management services, how do your clients perceive you? Have you taken an inventory of the deliverables you provide? Is your communication more investment-related or planning-centric? Have you thought about the conversations you have with clients and how much time you spend discussing the market versus your clients’ goals?

I think many of us are guilty of focusing too heavily on investments when we communicate with our clients. It may be time to reevaluate our approach.

A great example of this is the quarterly investment performance statement. We talk to clients about the importance of focusing on the long term, but every 90 days we send a report highlighting short-term fluctuations. In addition, many of us then compare the client’s investment returns to a benchmark (or several) that may or may not accurately reflect the portfolio.

What message is this sending? Comprehensive planners offer much more than simply investment management and I know many of us do not want to be viewed as the person trying to help clients beat the market.

"Many of us are guilty of focusing too heavily on investments when we communicate with our clients. It may be time to reevaluate our approach."

Perhaps a few minor tweaks can help how we position this traditional deliverable. What if, instead of mailing (or e-mailing) clients these performance statements every 90 days and highlighting their returns, we leverage technology to change the method of delivery?

Delivering investment statements via a client vault ensures they are easily available as necessary, but because the client needs to proactively login to see the statement, short-term investment performance becomes less of a focus.

You may even consider posting the statement without notifying the client in order to further underplay the focus on performance. Another benefit of using the vault for statement delivery is that you may be able to track which clients are reviewing these statements. Arming yourself with this information may tell you which clients are hyper-focused on shorter-term performance numbers. Try doing that with paper statements or email.

Another tweak we can make to the quarterly statement is to provide a context for the returns. Does providing clients with relative performance to arbitrary benchmarks help them understand if they are on track to reach their goals? Perhaps instead, you could provide the client a report illustrating how his or her performance is affecting the probability of achieving specific objectives.

What if Clark and Ellen Griswold received a quarterly statement that showed them exactly where they stand toward their goal of saving for Rusty and Audrey’s college? The statement could still show performance, but track that performance against the family’s goals – The Griswold Family Index, if you will. I believe the resulting conversation would change completely. Instead of calling to talk about why a certain investment didn’t perform as well as the S&P 500, Clark might call to ask for ideas on how to save more or discuss whether now is the time to take that family vacation they’re been dreaming of.

By shifting our focus away from investment performance toward goal-based performance, we’re shifting into a more holistic mindset. After all, what does investment performance really mean? It’s not actually about beating the S&P 500 over a quarter, it’s about achieving a long-term goal. It means the difference between having that college savings plan 78% funded versus 85% funded. It means the difference between deciding to put more into the 529 plans versus having a little extra money to take that family vacation. That’s what we should be communicating to clients.

The great news is that technology has made this easier than ever to implement. Take this opportunity to speak with your current vendors to see how you might be able to implement vault storage and personalization of client statements, which can enhance and elevate the experience you provide.

Please keep in mind, I am not suggesting we stop providing transparency on a client’s portfolio or deny clients access to the data they wish to receive.

As stewards of our clients’ wealth, we must provide transparency in all areas; however, we also need to help our clients to focus on what’s important. Technology can help us place less emphasis on the short term and replace relative performance conversations with conversations that will help our clients achieve that which is truly important, as measured by The Griswold Family Index.

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