Your service scorecard

By Tom Hamza | August 9, 2007 | Last updated on August 9, 2007
3 min read

(August 2007) The best clients understand what you are doing, they appreciate the service you deliver and they see the value in your relationship. They have long-term perspectives and they don’t evaluate the relationship based on investment returns or short-term market fluctuations. That said, these clients are also more likely to use rigorous criteria when shopping around for the right advisor.

In the coming months, The Investor Education Fund plans to develop a series of checklists that investors can use to assess the performance of their investments and their advisor.

It pays to be mindful of what criteria clients will use when evaluating performance. We’ve found these clients will generally consider two things: How well you work with them, plus a longer-term performance assessment.

1. Assessing the way you work together.

We have created the following checklist to help investors evaluate performance, but also to provide a self-checklist for advisors.

• How promptly do you return calls? This is a no-brainer, but one that tells clients more about their advisors than you would think. Accounts will always be prioritized by size but this does not excuse tardy response times of more than a few hours unless the market is in a rare crisis situation.

• Do your clients understand that you think in terms of their financial goals and tolerance for risk? Obviously, you’ve created an investment plan to meet your client’s goals and objectives. But is it clear that you refer to this plan throughout the relationship? Has it ever been revisited and updated? If you don’t talk about risk and the investment plan your client may wonder if your recommendations are made in the context of this plan.

• Do your clients get regular updates on portfolio performance? Do they get contacted when something changes? Review your investments with your clients regularly — the bare minimum benchmark of once per year is not good enough. Markets and portfolios change but you need to be the steady hand at the wheel, even if you’re calling to say everything is going well. If your client has changed jobs, or has had a significant life change and you don’t find out about it until months later, you probably aren’t communicating frequently enough.

• Do your clients feel comfortable talking to you? Do you answer client questions in terms they can understand? We know that investors should never feel pressured to invest in something. A good advisor will give options and explain the pros and cons. Clients need to be assured that you are acting first in their best interests — even if it means losing a commission. Think back through your client list. When was the last time each client asked a good question? If they haven’t, is it because they are shy? Disengaged? Or is it because they don’t trust you?

2. Assessing the long-term performance of your advisor.

There are different ways to evaluate performance. All of these should be looked at together, within a long enough time frame — typically three, five and ten-year periods — to properly assess performance.

• Absolute performance: Compare results to the client’s plan (or absolute performance). Will the investments your client owns help them reach their goals? Look at your total returns over several years to get a better picture.

• Relative performance: Compare portfolio results to the market. Have you compared client returns to an appropriate market index and peer group? You should be advising your client about which measures are the best benchmarks for their investments. A good advisor is proud of their work and will be open to have clients evaluate and compare it to the market.

• Look at the net return. This is the return after costs, including advisor fees and taxes. If your client is not calculating returns based on the net return, compared to the gross return to show management costs, then you need them to start including these costs in their calculations. Clients understand that there are costs. If you talk about it, you can show that you’re thinking of them too. This will come up with every good investor at some point — you need to be proactive by addressing it upfront.

Tom Hamza is president of the Investor Education Fund. For more information, visit

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Tom Hamza