Timely template letter: Turbulent times and client statements

(July 2006) The recent turbulence in the markets will no doubt have clients concerned about their portfolios. With statement time quickly approaching this is an excellent opportunity to remind clients that short-term volatility is no reason to abandon their long-term goals. Use this template letter to touch base and help give them some perspective.

Dear [Client’s name],

We live in interesting times.

As I’m sure you’ve noticed, energy prices and interest rates are on the rise. These factors, coupled with some serious geopolitical concerns — especially troubles in the Middle East — have helped to create quite a bit of turbulence in the markets.

The quarterly statements you are about to receive will certainly reflect this reality. Obviously the types of investments you hold will determine to what extent your portfolio will be affected by recent events, but I wanted to send this note to remind you that short-term volatility is not a reason to abandon your long-term goals.

Consider, for example, the world situation thirty years ago:

• • In 1973, there was the Yom Kippur war between Israel and a number of Arab nations.

• • In 1975, the rate for a conventional five-year mortgage in Canada hovered between 10.5% and 12%. By June of 1982, it would reach the dizzying height of 19.75%.

• • In 1977, the Baader-Meinhof gang and the Red Army Fraction launched a series of terrorist attacks in Germany.

• • In 1981, oil traded around $38 US a barrel (adjusting for inflation, that’s about $85 US a barrel in today’s dollars).

• • In 1986, the United States confronted Lybia’s Colonel Qaddafi and faced the Iran Contra scandal.

• In 1987, stock markets experienced the “Black Monday” crash, losing about a quarter of their value.

At the beginning of January, 1970, the Dow Jones Industrial Average was trading at 809.2 points. Twenty years later in January 1990 — despite all of the disruptive world events listed above — the Dow had still managed to add more than two thousand points and was trading at 2,810.15.

So, sure individual years may be rocky, but it’s important to consider them in context. Take the Toronto Stock Exchange Composite Index as another example. It has registered almost no growth year-to-date and, from up close, that may be disappointing. But if you ignore these recent ups and downs and take the long view, factoring in last year’s gangbuster performance, you’ll see the TSX is still 25% higher than it was at the beginning of 2005.

I’d like to finish by saying that I am available to discuss any concerns you might have about your investment mix. I would be happy to suggest ways we might better position your savings to not only minimize potential risks, but also how to take advantage of future growth opportunities.

Sincerely,

[Your signature]

[Your name]

(07/19/06)