Gray hairs have a leg up in this market. Younger advisors rely on their ability to explain their process

May 27, 2010 — 4:26 AM UTC by Gerri Leder


Investor temperaments can change after a market upheaval. Have you noticed how wealthy clients now talk more about keeping their hands on the details of their portfolio, drilling down more on fees and trying to comprehend risk? Whether this means they are skittish, skeptical or just trying to become more informed, you may be feeling the increased pressure.

Experience matters but process, and how you explain it to your clients, is just as important. Many investors are searching for acceptable investment approaches. They want to regain lost ground and move closer to their retirement goals and they can’t afford to repeat their mistakes. How can you convey that your investment approach is based on sound principles and offers them a reasonable chance for success (assuming that it does)?

Older advisors have an advantage: They can demonstrate their resilience through multiple market cycles. 1974. 1987. 2001. And that will bring comfort to clients who are ready to talk about risk.

Regardless of your tenure, you have probably learned more about moderating risk through this last investment cycle. Be prepared to have that conversation with your clients.

Each investment approach is different. Some firms develop an investment policy statement for each client at the outset of the relationship. It’s easy to identify the qualities in stocks to buy, but how do you reach consensus for a sell? When equity markets pull back, how do you offer downside protection?

Perhaps your business model has you overseeing the investment process and delegating to investment managers. You offer your clients a similar but distinct set of proficiencies and resources. But with daily investment decisions being made by others, clients may wonder: What, exactly, does my advisor do? What do I receive for the fees I pay? When you describe yourself as the clients’ partner in the process, will they understand the value you provide?

Valid role

The client relationship manager role is a valid one, and you will have to explain it. You work with clients to discover their needs and goals; communicate with them periodically; coordinate with their tax and legal advisors; provide quarterly investment perspectives – and more. In the process of spelling things out, they will see what you see: that working with an advisor like you, someone who is backed by an experienced client service team, and offers a client-centered investment process, benefits them greatly.

Some independent advisors have been told that their value lies in having no conflicts, unlike the other guy. This claim, no matter how truthful, does not a value proposition make. “No conflicts” investing reminds me of the political candidate who is running against the incumbent with only the incumbent’s indictment to offer in contrast. Don’t sell yourself short – lead with the positive attributes of your investment approach and your practice.

Financial advisors and asset management firms manage money based on their convictions, capabilities and beliefs. If you can differentiate based on your investment process, you build confidence. Present your investment approach and let the prospect contrast it with the firm or advisor they had before.

Then get out there. After you freshen up your story or strengthen your value proposition, be sure to share it with longstanding clients as well as new ones. This conquers three objectives: you will remind clients why they work with you, you may introduce how they could be broadening their relationship with you and finally, yes, they may remember to refer you to their friends.

Gerri Leder is founder and president of Baltimore-based LederMark Communications. Gerri is a monthly columnist for the 91,000-circulation On Wall Street magazine.

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