Presented by: David B. Loeper, CIMA ® , CIMC ®. W E A L T H C A R E Monitoring and Ongoing Advice. Your Value Proposition With Wealthcare:. “I make the most of the one life you have by confidently achieving the goals you personally value, without undue sacrifice to your lifestyle - PowerPoint PPT Presentation
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Sample Performance Report:Last Quarter YTD Since Inception
Current Value $5,050,000 $5,050,000 $5,050,000Starting Value: $5,000,000 $4,800,000 $2,000,000Net Contributions/(withdrawals) $0 $0 $1,500,000$ Gain/(Loss) $50,000 $250,000$1,550,000Total Return in % 1.00% 5.21% 44.29%Custom Benchmark1 1.25% 4.88% 49.52%
Trailing Annualized Returns: Your Portfolio Custom Benchmark1 Difference1 Year 31.65% 29.92% +1.73%3 Years 1.07% 1.17% -0.10%5 Years 3.20% 2.99% +0.21%Inception (6.5 years) 5.80% 6.38% -0.58%
1Custom Benchmark Allocation:
Your Conversation…“Last quarter we were a little behind your benchmark due to the overweighting in value stocks that occurred due to their strong performance in the prior quarter.
Despite that, we are still ahead of your benchmark YTD, for the last year and also the trailing 5 years and only slightly behind your benchmark for the last 3 years
and since inception.”
Current Benchmark Dif ferenceLarge Cap Core 39.44% 37.00% 2.44%
Mid Cap Core 0.00% 0.00% 0.00%Small Cap Core 19.19% 18.00% 1.19%
Large Cap Value 4.80% 4.50% 0.30% Mid Cap Value 4.80% 4.50% 0.30%
Small Cap Value 2.13% 2.00% 0.13% Large Cap Grow th 3.92% 4.50% -0.58%
Most clients, when I first meet with them and ask about their financial goals say something like:
“What is really important to me, is to have a portfolio that over at least a 5-10 year time horizon produces a greater mean return with less standard deviation than a passive index blend comprised of 37% large cap core, 18% small cap core, 4.5% to both large and
mid cap value & growth, 18% small cap core, 2% small cap value & growth, 13% foreign and 10% intermediate bonds.”
- Target allocation to 37% Large, 19% Small, X% Value, Y% Growth?- Efficient portfolio for standard deviation tolerance?- Efficient portfolio for 95th %-tile downside risk tolerance?- Specific return along with 10 or more years of patience?
- AND, assuming YOUR benchmark is somehow tied to their goals, the client was clairvoyant so they never change their goals or priorities and everything in their life AND the markets go according to plan?
- Target allocation to 37% Large, 19% Small, X% Value, Y% Growth?- Efficient portfolio for standard deviation tolerance?- Efficient portfolio for 95th %-tile downside risk tolerance?- Specific return along with 10 or more years of patience?
- AND, assuming YOUR benchmark is somehow tied to their goals, the client was clairvoyant so they never change their goals or priorities and everything in their life AND the markets go according to plan?
Providing Advice with Wealthcare…» It’s easy» Focus on progress and the impact of markets on goals» Answers with ‘therefore’» Identify when changes are necessary due to markets» Make adjustments when goals and/or priorities change»REPROFILE CONSTANTLY – If markets behave well then…Or if markets behave poorly…
Advisor: “You valued sending Arvin Jr. to the local university. Is that something you continue to feel strongly about?”
Client: “Actually, Junior has performed better than expected in his school work. We found out last week that he has received a full academic scholarship. Thus, the costs for education will be much less than we anticipated. How might this affect our other goals?”
Advisor: “When we last met, you felt comfortable with your current level of savings. Has anything changed since our last meeting that would cause you to save more OR less next year?”
Client: “Well… I will not receive my annual bonus next year due to my company’s restructuring. We are concerned about our ability to make our annual trip to the Caribbean. We would prefer to continue our trips to Jamaica, but that would result in less savings next year. How would this impact our comfort level?”
Jay & Peggy Retirement Life Choice: Home in Florida
Advisor: “When we last met, you felt comfortable with $30,000 a year for travel, is that going to be enough? You recently went to Italy, I bet that was a great trip, did you make it to the Coliseum?”
Client: “Well… You know what, I stopped in Florida on the way back to visit an old friend. He is having a great time down there, lives on a golf course and just bought this fabulous boat. I had so much fun we actually called a realtor and I looked at a few properties. Could I purchase a home in Florida?”
Client did not want to reduce their retirement spending and cut their travel in half, but wanted to be in Florida in the winter to golf and spend time with their friend.
Because purchasing the home presented excess uncertainty we recommended renting for the next five years.
We told them to update us with how they feel about Florida and we will continue to evaluate the purchase.
Maybe my experience is weird and the clients of advisors that I’ve been doing this with are strange…
Client of advisor – August ’03 – Designed and accepted recommendationsSept – ’03: Decided to sell 1999 Porsche Carrera for a new Maserati – New AdviceNov – ’03: Unplanned two week trip to Italy – New AdviceDec – ’03: Portfolio up 20%+, worried about market correction – New AdviceJan – ’04: Wants to join Country Club and buy second home – New Advice
What do you think is more likely?This client is very atypical, because most clients make up their minds and stick exactly according to plan, or…This client is fairly typical and the advice we are giving is atypical?
Just as Wealthcare clients have a lifetime of choices…
You can:Define benchmarks your client doesn’t connect to…Talk about things that cannot be changed…Risk your relationship on what the markets may randomly produce…Bully your clients to “hang in there” and “stick with it long term”
Be a Reporter…Be a Reporter…Which DO YOU CHOOSE?Which DO YOU CHOOSE?
Make the most of the one life your client hasAdvise them of the choices they have to improve their lifeAnd control excess uncertaintyRespond to their changing goals and priorities with new advice
Be an Advisor…Be an Advisor…
You have the choice as to how you service clients…