Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Retirement Planning > Social Security

Communication: The Key to Every Financial Relationship

Your article was successfully shared with the contacts you provided.

As advisors, we recognize the value of client communication. It’s equally true that without it, the advisor-client relationship is more likely to suffer. In this post, I will discuss our revised communication policy. We’ll look at the reason behind it, what it will include, and how we will deliver it.

Clearly, trust is one of the most important factors in the client-advisor relationship. I say “one” of the most important factors because there are others that play a vital role in sustaining clients. For example, a client may trust us completely, but believe they have found a better way to invest (a subject for another time).

Regardless, trust is something earned over time. It is based on the behavior which is observed by clients and by comparing what we say with what we deliver. Because communication is one the most important factors in obtaining a client’s trust, we are revising our communication policy.

Our New Policy

Whenever a security is bought or sold in a clients account, they receive a confirmation statement. This statement discloses the security bought or sold and the quantity of the transaction. However, it does not explain “why” we bought or sold it. I believe there are times when this is important. Beginning in the fourth quarter 2018, and in certain cases, we will send an email to clients explaining the type of security (ex: category) and why we purchased or sold it at that time.

When Will This Apply?

Until recently, interest rates have been extremely low for quite some time. Short-term bonds became an over bought category with a high price and a low yield. This created a need for income-producing investments, which was met, at least in part, with derivative-based securities that tend to be more complex in structure. As an example, the security may pay a guaranteed interest rate for a specified period, then pay that same rate if certain conditions are met. The pricing mechanisms for these securities is not as reliable (i.e. firm, accurate), partly because they are not as liquid as, say, government bonds. This may result in a reduced market value, which affects the clients total account value, but does not affect the interest payment.

Another example occurred after Brexit. On Friday morning, June 24, 2016, we awoke to the news that the U.K. had voted to leave the EU. This caused global markets to tumble. As I recall, Japan lost about 7.5% and the Dow lost about 3.5% that day. The following Monday, markets lost about half of what they lost that Friday. The next morning, Tuesday, June 28, I increased stock allocations across the board by 8.0%. As it turned out, that was a bottom. Again, while this policy won’t apply to every security, it will apply if we feel it will benefit the client.

How Will We Do It?

We subscribe to Redtail as our CRM. Because it is linked with TradePMRs platform, we can search for all clients that own a particular security and send a bulk email with the pertinent information. Because this will provide education to our clients, we believe it will enhance our value proposition.

Thanks for reading and have a great week!


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.