The story of two clients
What Makes a Good Comprehensive Wealth Management Advisor? I have held this position in various capacities since January 1987. Needless to say, I have seen a lot of it over the years. Simply put, my opinion is that the best advisors look out for the best interests of their clients. Operating in this mode, over time the most important factor changes: confidence!
All advisors should have expertise in the areas of investments, insurance, estate planning, taxes, and the financial planning process. Having the Certified Financial Planning ™ designation indicates that a person has proven knowledge in these areas – and needs to supplement it with highly structured continuing education. Frankly, I have known some very good advisors who hold the CFP® designation – and conversely, I have known some that I felt I missed. I must add that I have known competent professionals who did not have such references. It is, however, a good starting point.
I chose to become a Certified Professional Financial Planner in 1993 and I think it has served my clients and myself very well. But in every life there must be rain. The following is a story that suggests that when you feel you’ve done everything right, there is another variable that can impact the success or failure of the client-advisor relationship: when the relationship started. .
In 1998, a wealthy client was referred to me. He asked me for advice on where to put a larger amount of money, and also a smaller amount that perhaps had the capacity to really grow – a little more speculative. I selected three proven large-cap mutual funds that had long and favorable track records and were managed by a blue-chip, gold-plated company. This is where we put the greatest amount. You’re probably ahead of me now, but I suggested an Internet mutual fund for the smallest amount – because it had grown extremely well. Meanwhile, in 2000 (you may remember it) the markets entered a three-year recession. Starting with the Bush / Gore vote recount debacle in Florida in 2000, followed by September 11, 2001, followed by the collapse of WorldCom, Enron and a group of leading companies. Of course, the dot.com bubble caused technology stocks to fall. It was a very long bloodbath! Internet funds fell by around 80% and blue chip funds fell by around 30% – there was no place to hide during this time! Disappointingly, that customer relationship came to an end.
Fast forward to 2003. A CPA friend of mine asked me to recommend an investment that was beaten. One that I thought had the potential to really grow. It was for his personal account. I suggested my old “friend”, the Internet fund. It seemed to be largely oversold! In his retirement account, with more money – and contributions added monthly – I suggested three top-notch large-cap funds. In other words, exactly the same investment (s) that had performed poorly for my previous client. After a short time he was delighted with the performance. This strategy has worked well for years!
Ironically, my CPA friend took a trip with another CPA. It turns out that his traveling companion was taking care of the business of my former client who had invested in 1998. Needless to say, his report on my performance on behalf of his clients was not very favorable.
Upon returning from their trip, my friend called me and asked me what the customer who had had such a bad experience invested in. Timing can be anything – in life, in romance, in client relationships, and certainly in return on investment.
The real moral of the story is this: The best advisors are also masters of managing client expectations. This expertise typically takes a few years to mature and develop – and getting through a bad market cycle or two can certainly help hone the skills needed to become an effective “now customer”. The result is generally a more favorable outcome for the client and the advisor!
The opinions expressed in this document are for general information only and are not intended to provide specific advice or recommendations to an individual. To determine which investment (s) might be right for you, consult your financial advisor before investing. The economic forecasts set forth in the presentation may not develop as expected and there can be no assurance that the strategies promoted will be successful. The referenced performances are historical and do not guarantee future results. Not all indices are managed and cannot be invested directly. Investing involves risks, including loss of capital.
RFG Advisory and its investment representatives do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied upon, for tax, legal or accounting advice. Please consult your own tax, legal and accounting professional for advice on these matters.
Visit us at www.williamsfa.com. Tommy Williams is a Professional CERTIFIED FINANCIAL PLANNER ™ with Williams Financial Advisors, LLC. Titles offered by representatives registered via Private Client Services, member of FINRA / SIPC. Advisory products and services offered by investment advisory representatives through RFG Advisory, a registered investment adviser. RFG Advisory, Williams Financial Advisors, LLC and Private Client Services are unaffiliated entities. The branch is located at 6425 Youree Drive, Suite 180, Shreveport, LA 71105.