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Portfolio > Asset Managers

The Holistic Approach to Clients

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Managed accounts have experienced rapid growth in the past decade, despite a negative economic climate and a corporate culture humbled by a smattering of recent scandals.

The accounts popularity is largely due to the advisory/consultative relationship, according to the Money Management Institute, Washington.

Jack Sharry, president, The Private Client Group, Phoenix Investment Partners, Hartford, is on the institutes board of governors. He says the advisor/client relationship has likely been key in keeping managed accounts popular with the investing public, despite the challenges imposed by the state of todays stock market.

The institute suggests advisors take a holistic approach to guiding clients whether times are trying or not, Sharry says. This means focusing on a clients entire financial situation rather than the return on a particular fund or stock, he says.

Is the client “appropriately diversified, staying the course, set up from a structural standpoint?”

“Those are the issues that should be addressed,” Sharry says.

When an investor is losing a significant amount of money, an advisor should be flexible, but not reactive, he says. “You want to adjust the plan, and you want to be flexible because life changes, so its important to set a course in an unemotional time, you dont want to react.”

The institute says professionalism and intellect are characteristics the consumer of financial services looks for.

Intellect is luck of the draw, Sharry says, but professionalism is something anyone can display. It includes maintaining contact with ones clients regardless of how well or poorly their portfolios are performing.

“While (clients) might be frustrated with their advisors, they dont really hold the advisor accountable, they want to talk to someone whos knowledgeable and get context,” Sharry says.

“So often the advisor feels they should have the answer. The best advice we can give advisors is to be in touch, talk about the news, events, remind clients about their long-term view and not to lose perspective in a challenging period.”

The consultative process should include seven steps, according to the institute:

  • Client interviews and development of investment policy statement;
  • Determine asset allocation requirements based on guidelines of the investment policy statement;
  • Select styles and managers to accomplish asset allocation;
  • Monitor performance of each manager;
  • Monitor changes in clients goals and objectives;
  • Rebalance portfolio using guidelines of the investment policy statement and performance factors;
  • Hire and fire managers as a result of performance monitoring.

Russell Smith, national director of sales and marketing for the Managed Solutions Group, Merrill Lynch, New York, which is a member of the institute, says following these steps allows advisors to show clients measurable benefits at the first meeting.

“We gain an understanding of who the client is and his or her needs and goals and we explain how the consultative process works,” Smith says. “When this is done well, the client takes ownership of the process.”

This process can be used as a means for customizing a portfolio as well, including restricting certain securities and accomplishing tax-efficient investing immediately, the institute says.

By being “fanatically curious” the advisor begins to understand what clients want from their portfolio, the institute says.

Designing asset allocation by educating the client regarding “various asset classes and how to combine them to provide optimal return in exchange for the risk a client is willing to take is the primary ingredient for successfully reaching a clients investment objective,” according to the institute.

Selecting style managers, monitoring performance, providing continuous value through meetings and keeping abreast of changes in the clients lives round out the ways the institute suggests the consultative process is best handled.

Reproduced from National Underwriter Life & Health/Financial Services Edition, August 12, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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