Seven great things to talk about during annual reviews

Don’t all annual reviews take place in January? Not really. Every client deserves an annual review.  They are often face to face, but today Zoom or phone calls might be the best approach. They are deeply personal, not merely statement or performance reviews. If you have 100 clients and can present two per day, that’s 50 days until you are done. With five working days per week, it would take you until mid-March. No, they don’t all fit into January.

Besides, some clients might have other things on their minds. In normal years, they might be on winter vacation.  Don’t many schools still have “ski week” or another winter break?

Seven Things to Talk About

You know how to conduct an annual review, so reviewing the basics isn’t necessary.

You deserve a report card. Clients love accountability from advisors. The stereotype used to be if you bought a stock on an advisor’s recommendation and it went down, they didn’t call as much.  Those days are gone.  You are literally saying: “If I’m doing a lousy job, you should be able to fire me.”  If your client feels you are “on the case” and acting in their best interests, this rarely happens.

Give them credit. 2020 was a good year for the market. It’s tempting to take credit. Let’s bear in mind if the market had a terrible year, you don’t want the blame laid at your doorstep. Give them the credit. Thank them for trusting you and following your recommendations. Thank them for “staying the course” when things got choppy. They will connect it was your advice that made the difference.

Measure apples to apples. Many years ago I had a client who said: “I’m very worried about the stock market.” I replied: “Why? You don’t own any stock!” He was invested in the bond market. Clients might compare their portfolio to an index and feel they underperformed. You can’t compare a 60/30/10 portfolio of stocks/bonds and cash with a 100% equity index. Create a blended index as an “apples to apples” comparison.

What return do you need to reach your goals? Comparing performance vs. indices is a tough game to win. Fees take a bite. Also, clients might be disappointed if they earned 8% when the market returned 10%, yet they aren’t elated when they lost 8% when the market was down 10%. Try to focus on a personal index, the return they need to reach their goal. If the client has many years to go, that number might not be that high. The positive is a few back-to-back good years allows you to recalculate the required return, allowing them to reduce risk as they get closer. The negative is the personal index must always be a positive number, otherwise you lose ground and need to make it up later.

When would you like to retire? The pandemic has changed people’s thinking. It’s been said “On their deathbed, few people say: “I wish I spent more time at the office”. If your client wants to bring their retirement date forward, you need to get thinking about how it might be possible.

What do you owe on credit cards? Find a nice way of asking. If they just made 20% in the stock market last year and are paying 15% on revolving charge card balances, taking some money off the table and paying down debt is a great idea. You know the stock market can suddenly change direction. There’s a saying: “Money talks. It says goodbye”. Debt doesn’t go down on its own.

Let’s talk about how much you are paying.  Clients think about fees, even if they don’t bring it up.  The total amount paid can seem a startling number. Expect their accountant will mention it. Think about the fees not as a percentage of only the assets charging them, but across the total assets where you are providing advice. They likely have bonds and cash equivalents where you aren’t charging annual fees. This should be more acceptable. Don’t forget, there are other assets held away where you might be providing advice too. You might not factor them in, but you might remind them.

There are plenty of other things to discuss. You know about them. Adding fresh money. Gathering assets held away. Rebalancing the portfolio. Referrals. You don’t need reminding about those points.

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.