Like a visiting relative we wish would just go away, the bear market has long overstayed its welcome. The longer it sticks around, the more tense your clients become. With that in mind, Morningstar reminded attendees at Insight Forum, the precursor to the 2003 Morningstar Investment Conference in Chicago this week, of a few tried and true ideas on how to present portfolio data–whether good or bad–to clients.
“One of the most common statements advisors are hearing of late from clients is ‘I am never getting back into the market!’” Jon Horvath, Morningstar’s educational consultant, told Forum attendees. “I have heard that statement numerous times in numerous forms, and we all know that it’s kind of silly,” but the market returns of the past few years, Horvath suggested, makes such a statement “seem like the sensible thing to do.” People are seeing their investment returns nowhere near what they were used to, Horvath said, many people are rethinking their retirement plans, and expectations are lower.
However, the expected real return on stocks is the same as it was five or ten years ago, Horvath argues; adjusting for inflation, it is between 6% and 8%. Clients should hear that from you, and more importantly, you should show them with illustrations.
Horvath touted the illustrative tools in Principia, of course, and demonstrated those tools to the attendees.
But regardless of what presentation software you use, Horvath recommended that instead of presenting clients with lists of numbers, make liberal use of illustrations, even simple ones, to present the current makeup and future benefits of portfolios to clients. You’ll get your message across to clients better, and they’ll retain the information better.