Helping your busy clients: Part Two

Different conversations

While busy discretionary clients may only want face-to-face meetings once a year, Franz calls clients at least quarterly to update them on portfolio performance, and other times to simply ask how a vacation went.

“The contact now happens on a strategic level,” says Franz. They no longer talk about buying and selling individual securities. “We talk about how the portfolio did in comparison to the market. That helps clients to understand returns are more than just a number.”

Kim customizes client communication based on the degree and type of contact a client prefers. For instance, she finds out how clients want portfolio performance presented during reviews: text-based, graphically or numerically. “Typically, clients want to meet more in the first two years of our relationship,” she adds.

Reviews are also a good time to ask for feedback, says Bertrand. “I ask, ‘Is this working for you? Are you comfortable with this volatility?’ If not, I suggest ways to adjust the asset mix.”

Yet for most clients, the bottom line is whether their initial investment has grown.

“Some clients just want to know if they’re still on target,” says Kim. “Then they’re happy to talk about their travel plans for the next half hour.”

And that’s the main reason they hire a discretionary manager, says Franz.

“We are adding to their quality of life. They don’t really want to invest. They’d rather go bike riding.”

Success Factors

The best discretionary managers have a long track record of performance over different business cycles, a good team, and an investment process that’s repeatable.

Humility is also important. “I eat crow quickly,” jokes Michael Newton, a portfolio manager with Macquarie Private Wealth in Toronto. “It’s what you do with your losers that’s the most important part. I take care of [those investments] quickly, and allow my winners to run.”

That requires objectivity. “You have to be unemotional with respect to the hourly gyrations in the market,” he says. “You need good behavioural management skills to keep yourself in check.”

That’s easier with thorough research. Newton reads financial reports and monitors the market daily. “There’s no vacation for me,” he jokes.

Discretionary managers save time elsewhere. Instead of calling multiple clients to confirm a trade, Newton executes his strategy right after completing research, often taking care of many portfolios at once.

four keys to discretionary management:

• Active listening
• Respect for clients’ wishes
• Meticulous documentation
• Standing your ground

FROM ADVISORY TO DISCRETIONARY

Richardson GMP portfolio manager Adena Franz spent two years converting from advisory to discretionary management “in order to avoid the back and forth with clients about every transaction,” she says. “It clarified my role in clients’ financial lives. They understood who was in charge.”

The first thing on clients’ minds was fees. To justify the increase, Franz established a list of benefits, explaining, “ ‘I’ve upgraded myself; I’m offering a better service. I now have the same licence as Beutel Goodman.’ ”

Franz told clients she would no longer be calling to ask permission to make trades, highlighting the freedom they would feel. “A lot of people haven’t a clue about investments, but they feel pressured to appear knowledgeable [and make a decision].”

Franz also upgraded her back office, and now uses Toogood Financial Systems Inc. “It’s what the Jarislowsky Frasers of this world use,” she tells clients. The technology allows her to track her overall performance and make models of models.

The last piece of the puzzle is the marketing message. Franz says all her material implies, “We offer discretionary money management only. If you want to run your own portfolio, go elsewhere.”

In the ten years since she’s made the change, only one client has left her practice. “He became uncomfortable [with the delegation],” she says. “He apologized to us, saying, ‘I just can’t do it.’ ”

Five questions clients will ask when you switch

• Will I lose control?No, the investment policy statement lets you direct how we manage your account.
• Am I taking on more risk?No. We’ll outline the amount of risk you are comfortable in the IPS and follow that when making investments.
• Will I be put in a box?No. You can have a client’s account holding two or three models so you don’t feel boxed in with everybody else.
• Will you pay less attention to me?Discretionary management allows me to spend more time learning about your goals and needs, instead of chasing you down to confirm trades.
• Will you still call me?Yes. The conversations will be strategic, rather than talking about individual trades.

Melissa Shin

Melissa is the editorial director of Advisor.ca and leads Newcom Media Inc.’s group of financial publications. She has been with the team since 2011 and been recognized by PMAC and CFA Society Toronto for her reporting. Reach her at mshin@newcom.ca. You may also call or text 416-847-8038 to provide a confidential tip.