Having the performance talk at your next client meeting? Ace it with part two of IFIC’s three-part series aimed at helping advisors ensure clients get the most from the new reports they’ll soon receive under CRM2. (Part one has tips for better conversations.)
To talk performance, IFIC offers these pointers:
- Show your client the return information on the performance report, explaining why his personal rate of return is unique (based on deposit/withdrawal timing, dividends and interest, and market value changes).
- Compare the personal rate of return with the target rate, and, if the target wasn’t met, explain why. Consider with your client whether adjustments are necessary.
- Explain “benchmark” and how it relates to the personal rate of return. IFIC offers a helpful analogy: a student compares her mark (personal rate of return for a fund) to the class average (return of a group of similar funds).
- Explain why the personal rate of return differs from the benchmark (for example, each uses different time periods and calculations, and the personal rate includes fund costs).
For plain-language explanations of target rate, benchmark and rate calculations, see the IFIC series, part two.
Also read: What is a capital gain?