Clients And Advisors Have Separate Views On Performance

Friday, March 16, 2012 08:09
Clients And Advisors Have Separate Views On Performance

Tags: client education | asset management | client communications

A recent survey noted the differing views held by advisors and clients regarding performance. While advisors take a longer term view of performance and tend to benchmark performance against achieving client goals, clients measure performance on much shorter term criteria. One year returns, volatility, and absolute returns were the focus of 41% to 54% of clients. Fifty-three percent of advisors focused on long term goal achievement.
Advisors also have a brighter view of markets going forward. The 2008 crisis did so much damage to portfolios that investors are still reeling almost four years later. Clients are also concerned about short term volatility, government policies, and global events. Such discrepancies between client and advisor views adequately reflect the experiences of each side in the client-advisor relationship.
Advisors who study behavioral finance will find many common biases in these views. People remember painful experiences much more readily than positive ones. They base decisions on those painful experiences. They also become selective in the information they use to make decisions. Advisors may have an opportunity here to educate clients on these biases and to view investment performance more objectively.

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Comments (2)

Lisa - this is almost comical in regards to advisor action. Advisors claim they want to investor to focus long term, but their main point of contact are performance reports that focus on short term calendar based returns.

Until reporting improves, investors will focus on what they are given....
brentb843 , March 22, 2012
Brent - I think it's a combination of things - firm structure and advisor focus. But I do know are some advisors at big firms who get it and are trying to serve clients at a higher level. Two other posts you may enjoy reading--one written on Tuesday of this week titled "Are Registered Reps Capable Of Acting In A Fiduciary Manner?" and today's post titled "Gaps In Client-Advisor Perceptions Point To New Model Of The Future."

You make a good point about reporting. It would be great to see benchmarking reports against the achievement of family goals and individual goals as well as against indices.
lisagray , March 22, 2012

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