I'm losing clients; is that normal? | Krisan's BackOffice Inc

If you’re losing clients like you’ve never lost before, you may be part of a trend I’ve observed.  I’ve seen more client drops among my managers in 2015 than in the last 5 years combined.  Even my managers with a near perfect client retention rate have lost clients.

BUT that trend appears to be ending.

Granted my observations are not based on any scientific polling. I’m simply observing the number of adds/drops in my daily work.  In the early quarters of 2015 I saw increased lost clients among my managers.  In the last quarter of 2015 I’m seeing an increase in new clients among my managers.  (And of course, my managers are the best!)

My observation

For those pursing a long-term investment strategy of a balanced portfolio, 2014 was a bad year and 2015 is worse.  In other words, everyone seems to be down.

My explanation

The recent volatile market is separating the “true-believers” from the “return-chasers.”  The clients who truly believe in the investment strategy of their manager are staying the course.  The clients who are simply chasing returns have flown away in search of greener pastures.  (Hence the recent uptick in new clients as they land in a new field.)

My advice

My advice is the same as it was in 2011:

  • Send the same reports you send every quarter. Resist the temptation to completely change reports because the market is down.  Clients are likely to view the switch as an indication that you have something to hide
  • Send performance reports that shows long term performance — more than the last three months or year to date.
  • Compare your returns to an index or a target. Context can explain why a performance return that looks awful is actually great.
  • Visually show the big picture.  Clients tend to measure their portfolio against the last high-water mark, but it’s always good to have been invested if you go back long enough.

As David John Marotta & Megan Russell wrote:

1. The markets are inherently volatile. If you want decent returns, you have to endure a large monthly standard deviation.

2. Ignore the daily market movements. Also disregard the monthly noise, and don’t let a season in the markets ruin a brilliant investment strategy.

3. Diversification works over long periods of time. One asset class can win for months at a time. It’s better to rebalance than to chase returns.

4. It is always a good time to have a balanced portfolio. Although you may lose each month, you will win in the long run.

5. Planning works better than intuition. Without an asset allocation, you can’t rebalance back to it and received the rebalancing bonus. Without an asset allocation, we are all tempted to sell what has gone down and buy what has gone up. But that is the exact opposite of what we should do.

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