The return your clients really ‘need’

The return your clients really ‘need’

The return your clients really ‘need’ New research from a global asset manager reveals just how big a return you’ll need to deliver to meet client expectations, and it ain’t 6%.

Natixis Global Asset Management conducted an online survey of 150 advisors in June as part of a bigger global study of 2,400 advisors in 14 different countries. The results reveal some of the challenges facing advisors here in Canada; the biggest being a disconnect between the annual return advisors expect to deliver to clients and the return clients say they need in order to meet their retirement goals.
 
NGAM’s June survey found that advisors believe clients can expect long-term annual returns of 6.5% after inflation while a separate survey in early February by Natixis of 750 individual investors with investable assets of more than $200,000 found that they require annual returns of 9.3%, a difference of 280 basis points.
 
“We’ve seen this disparity in past surveys and when we go through the comments that we get from some of the advisors, they have a much different perspective of what’s going on in the market and across the board: they tend to be a bit more guarded given volatility about what they can provide clients [in terms of returns],” Matt Coldren, an executive vice president in the client solutions group at Natixis Global Asset Management, told WP. “I think it’s a challenge addressing that disparity when you’re trying to manage a client’s expectations and they’re looking for 9% and you have all this volatility.”
 
While a majority of the survey’s findings paint a very positive picture of how financial advisors view the coming 12 months when it comes to growing their businesses, it still highlights how hard advisors must work to keep clients from getting emotional about their investments.
 
Interestingly, the Natixis survey found that market volatility represents – albeit indirectly – the single biggest threat to advisors growing their businesses. More than three-quarters (82%) of advisors believe that keeping clients from making emotional investment decisions is key to their future success.
 
That ties directly back to that 9% expectation.
“You don’t want clients to make decisions based on emotions if they feel like they’re not reaching the 9%,” Coldren said. “That’s really in mind where the advisors really provide a lot of value. Trying to manage those expectations and keep their perspective on the long term.”
1 Comments
  • Murray Schultz 2015-09-29 11:35:34 AM
    I find it interesting that corporate investors see their opportunity costs as something in the range of 15% while private retail investors are lucky to get 6% but need +9%, post tax. There is a huge disconnect between the types and quality of investments the average "financial advisor" and his/her company will provide and the real opportunities available on the street. Some second mortgage investors are getting upwards of 15% (net before taxes) through their mortgage brokers, for example. While risk and reward tend to go hand-in-hand, the truth is that a well managed portfolio minimizes risk while increasing returns - isn't that what investors are paying the middlemen for? Otherwise, they are simply glorified account clerks.
    Post a reply