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Is Your Portfolio-Review Schedule Sabotaging Results?

April 18, 2013

How do you think of your investment management style? Do you consider yourself an advisor who believes in long-term, diversified-portfolio management, or one who believes in market timing?

Most advisors consider themselves adherents of long-term investing, so I’ll assume you do, too. This leads to my second question: How often do you conduct review meetings with each client?

I’ll bet your answer is that you conduct quarterly review meetings. My guess is the result of feedback I have received from my practice-management seminars, as well as conversations I’ve had with thousands of advisors over the years.

At the same time I’ll bet that you, like most of our peers, get frustrated when clients make the same investment mistakes again and again. These errors include:

  • Staying in cash because of worry about the next economic cycle
  • Picking investments based on past performance
  • Trying to find the next big winner, hot stock or top-ranked fund
  • Making emotionally driven investment decisions

But who is at fault for these mistakes? Think about it: You tell your clients to focus on the long term – and then you insist on meeting with them quarterly so you can discuss the performance of their investments over the prior 90 days.

We all know that actions speak louder than words. Meeting with clients to discuss their quarterly results sends the message that the short term matters. By meeting every three months, you’re actually interfering with, rather than supporting, your clients’ efforts to invest more successfully. As advisors who truly believe in long-term investing know, the last three months shouldn’t matter to someone who’s trying to save money for college costs that won’t be incurred for 10 to 15 years, or a retirement that might be 20 or 30 years away.

At Edelman Financial Services, we talk with our clients often. We also send them a quarterly e-mail asking them to tell us if anything has changed, which might lead to a conversation or an appointment. And annually, we invite them to schedule a formal review meeting. Many of our clients decline our invitations because their situations haven’t changed and they know that current events are not relevant to their long-term investment horizon, so there’s nothing to discuss. But they know we’re happy to meet with them anytime and as often as they wish – and that’s enough for them.

The results: From a relationship perspective, our clients feel cared for even without quarterly meetings. And from a practice-management perspective, we can serve more clients more efficiently, ensuring that we are available anytime to those who truly need us. It’s a win-win.

If you want to help your clients avoid common investment mistakes and improve your practice at the same time, make sure you set a good example.