Presentation: Help clients understand benchmarking

Here’s some text to help you put together a presentation on helping clients understand benchmarking that you can customize for your next client meeting.

To make it easier for you to prepare materials for clients, we’ve developed this text for a slideshow on the topic of measuring a money manager’s value. This text outlines some of the benchmark indexes against which performance is measured, and shows how fees and inflation rates factor into returns (there is no PowerPoint).

We know you’ll want to customize and add elements specific to your client, so we’re providing it in a Word file to make it easier. All you need to do is fill in your own details and then move the slides into your favourite presentation software or app.

We hope this offering helps enhance your client meetings.

SLIDE 1

You’ve invested in some actively managed mutual funds. They cost more than index (passive) funds, so you ask yourself the question:

Am I getting my money’s worth?

SLIDE 2

To answer this, you need the right points of comparison.

If you don’t evaluate the funds against the proper benchmarks, it’ll be apples-to-oranges.

SLIDE 3

Example

You buy a Canadian large-cap equity fund that goes up 6% in a given year. You hear on the news that in the same year the Dow Jones was up 8%.

Does this mean your manager underperformed by 2%?

SLIDE 4

No

The Dow Jones is a U.S. equity index, so it’s the wrong point of comparison.

You need to look at what would have happened if you bought Canadian large caps in amounts that match TSX weightings.

SLIDE 5

And, the calculation has to take all fees into account.

SLIDE 6

Say your fund gained 6% and its benchmark went up by 5%. If you’re paying a 2.5% management fee, you did worse than if you’d taken the passive option.