In last week’s post, we discussed why clients leave an advisor and how you can keep clients happy. To summarize, no matter the reason given, absent some illegal act on the part of the advisor, the root cause of client departures is unmet expectations. The client expected one thing and the advisor didn’t deliver. This is because the client didn’t tell the advisor what they expected or the advisor didn’t communicate clearly with the client in setting realistic expectations.
People form beliefs based on personal experiences and information they’ve learned, even though the information may not always be correct. Although the truth is something which should be treasured it’s not always given the priority it deserves. How many times have you believed something to be true and then found out later that it wasn’t? Without a thorough vetting process, things like this can, and do, occur. Here are a couple of examples.
I received an email from a mutual fund company this past week touting how well their fund held up when interest rates rose earlier this year. Although the email didn’t come right out and say that it was a bond fund, it was implied. I say implied because the fund was included in a graph with several other funds, all of which were bond funds. It showed how this fund had a very small gain compared to a loss for all of the other funds. When I checked the ticker symbol, I learned the fund was an allocation fund.
That’s right, it was at least 50% stocks. Hence, it was an apples-to-oranges comparison. Moreover, it wasn’t even a top-shelf allocation fund! Even a bad fund can be made to look good if it is compared to a fund with worse performance.