How do you talk about performance?

Q: How do you talk about performance without committing yourself to future results?

Reg Jackson

portfolio manager, JMRD Wealth Management at National Bank Financial, London, Ont.

Our team has three main objectives for all clients:

• Preservation of capital
• Providing above-market rates of return
• Providing rates of return tax efficiently

Benchmarks are useful to provide a comparison; however, what happens if the benchmark is down 20% and your client is down only 15%? That client is still not happy. From our experience, clients are only concerned with absolute return, so relative returns are not terribly important. Our focus is on managing expectations and assigning conservative return assumptions for various asset classes. By educating clients on historical returns, the performance conversation becomes easier.

Joseph Bakish

vice-president, Richardson GMP, Montreal, Quebec

CRM2 puts advisors on a level playing field with regard to returns, since we all need to use the same calculations. That being said, our team doesn’t discuss returns often with clients, because we put the emphasis on proper financial planning strategies. We highlight areas we can control, such as tax planning and asset allocation, versus areas we can’t control, like market swings.

For example, in a down market we focus on strategies such as dollar-cost averaging or using excess cash to invest. In an up market, we highlight reversion to the mean, and we tell our clients not to expect returns to continue at such a high level. That way, when markets correct, clients are less likely to sell.

Agree? Disagree? Have your own question or answer? Write us at jessica.bruno@rci.rogers.com

by Michelle Schriver, assistant editor of Advisor Group.