Eight reasons to revisit your client's financial plan

Many will be avoiding monthly statements but advisors should be actively encouraging a planning review

Eight reasons to revisit your client's financial plan
Bryce Sanders

When you return from vacation, do you step on the scale the next morning? Of course not. When the market has a terrible month, do some clients leave their monthly statement unopened? Avoid looking at it online? Of course they do. Remember Linus in the Charlie Brown cartoon strip? “No problem is so big or so complicated that it can’t be run away from!” You should actively encourage financial plan review with as many clients as possible.  Here’s why.

Eight reasons to take the lead
In this case, we are looking at two separate, but related documents: monthly statements and their overall financial plan.

1, Fear of the unknown. They hear lots of bad news about the economy, the pandemic and unemployment on the TV news. They assume their portfolio is in ruins. I’ve heard someone actually asked: “Can the DJIA go below zero?” By helping them face their fears, you are showing leadership. You are doing this together.

2, Next month might be even worse. What’s the logic for not opening their monthly statement. “It’s so bad, I don’t want to see it. Maybe it will be better next month.” If it isn’t, now they have two months of damage to address. You are helping turn the unknown into something known. You are shining a light.

3, It’s rarely as bad as they thought. In the early days of the stock market decline, the DJIA was down about 30%.  The client with a $ 3,000,000 portfolio in mid-February might assume they’ve lost a third, or a million dollars! As their advisor, you likely got them to embrace asset allocation. Diversify. If they were 50% stock and 50% bonds, that 30% decline might mean their losses were (only) 15%.  That will be a relief!

4, Review trade confirmations. OK, they are frozen like a deer in the headlights. They were too scared to do anything. They likely utilize separately managed accounts. What have those managers been buying and selling in their portfolios? Your client will likely learn their managers have been hard at work on their behalf.

5, Review progress to goals. Retirement is a major goal for most clients? How are they doing?  There’s probably a long-time horizon between now and then. If you’ve been together for years, they’ve had several good years in the stock market. The recent decline might be a setback, but a small one given your history together.

6, In case of emergency, break glass. Why does your client maintain a cash reserve? To take advantage of opportunities in the market. Are there any right now? Should you send more money to some of those money managers? You’ve heard the expression, “Opportunity knocks, but you must open the door.”

7, Revisit their asset allocation. When times are good, you “take money off the table” to maintain the balance. Money flows from equities to fixed income. Now, the portfolio might need rebalancing in the opposite direction. The asset allocation indicated should be consistent with their risk tolerance. You are suggesting they maintain the balance.

8, Has anything changed? Hopefully your client is working from home. Perhaps they have been furloughed and expect to be called back to work in the weeks or months ahead. Others have lost their jobs or are taking early retirement. They might have lost their appetite for risk.  These factors have an impact on their financial plan. They need to be known. Their financial plan is a dynamic document.

As their advisor, you want to be taking the lead, getting them moving in the right direction.  Reviewing their financial plan together is another way of taking action.

Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, “Captivating the Wealthy Investor” can be found on Amazon.