Get the most out of portfolio reviews

By Bryce Sanders | March 3, 2014 | Last updated on September 21, 2023
3 min read

Clients can be fickle. When the market declines, it’s your fault. You’re the expert and should have seen it coming. When the market rises, you were just doing your job.

When you do well for clients get them focused on it. The best way is the face-to-face portfolio review.

How have I done?

You have a simple message: They made money. Start there and go into detail as needed. You can produce a half-inch bound color report to illustrate.

Read: How to improve portfolio reviews

Before technology made detailed reviews possible I would use a spiral notebook and say: “This is where you started. Here’s where you ended. You added ‘X’ and withdrew ‘Y’. Your return was somewhere between here and here (%).” A range was used because back then you couldn’t time-weight additions and withdrawals.

In essence nothing’s changed. “How have I done?” still means, “Where did I start and where did I finish?” Start by answering that question.

Measuring results

If their equities returned 10% and the market rose 30%, that’s underperformance. If they lost 10% and the market declined 30% you did a great job. They still won’t be happy about the loss.

Investors love comparing performance to broad market indices. It’s rare for anyone to be 100% in equities. More likely they own stocks, bonds, cash and possibly alternative investments. It’s not a fair comparison.

Develop a blended index aligned to their asset allocation. That’ll make the comparison more realistic.

Regardless of whether you use fee-based platforms, managed money, mutual funds or charge commissions, it’s likely you’ll underperform the averages because of transaction costs. It’s a difficult game to win. It’s possible to seek higher returns by assuming more risk, but the client may not be open to that suggestion.

The number that really matters is the return they need to achieve their goals. A Massachusetts advisor I know picked up on this idea years ago. He identified the return they’d need to reach the goal and christened it the “Family Index.” He’d include it as a performance measurement.

Read: Canada warms to goals-based investing

The advantage: It can be a low number if the time horizon is long. A couple of back-to-back good years allows you to recalculate it as they get older, taking less risk in the future.

The disadvantage: It’s always a positive number, never negative as long as they haven’t reached their goal. This is a disadvantage in a down market.

Getting Business

Let’s consider four items in the report that can lead to more business.

1. Asset allocation: The source of most of the investor’s return over time. This can be important when using the Family Index as a measurement. What do you see as the most appropriate asset allocation moving forward? How do they get there?

2. Assets held away (1): They’ve told you about accounts elsewhere. How did the review of those assets go? If you’ve done better, you’ve demonstrated your skill. Can those underperforming assets be brought in house?

3. Assets held away (2): “How did that other portfolio review go? You didn’t have one? Why not? How do you know how you’re doing? How often is your advisor in touch?”

4. Your idea: You make suggestions for investments you’d like to add, focusing on why they’re a good choice. You like everything the client already owns and don’t want to sell anything. Another $50,000 is needed to make your idea happen. If the client agrees with your logic, she may fund the new investment with money held elsewhere.

5. Whom do you know? It was a very good year and your clients did well. But not all investors got the same result. Ask clients if they know people who didn’t do as well as they did. It can lead to referrals.

Portfolio reviews almost always involve rebalancing. Money is in motion. Make the extra effort to tell your story when times are good. Clients need to hear it. They’ll certainly remind you when times aren’t good.

Read: How to lose referrals

Bryce Sanders

Bryce Sanders is President of Perceptive Business Solutions Inc. in New Hope, PA. His book “Captivating the Wealthy Investor” is available on