Often the year-around communication with client leans towards market updates and investment statements. An annual review of investments on the other hand is a more detailed discussion devoted to discussing the key changes in the client’s life and investments in the last twelve months.
For advisors, annual review meeting can be a powerful tool to deepen client relationship. Here are a few important points that you need to remember during the next annual client review meeting.
Do homework
Apart from analyzing performance of the schemes that you have recommended, anticipate questions that may arise so that you are in a position to answer them.
Set a friendly tone
Engage in small talk to make your client feel comfortable. You can ask them about their wellbeing or ask them if anything new has happened since you last met him. You may also talk about the markets to set the stage for a discussion about their investments.
Track performance
You might have recommended certain funds based on the past performance. However, unforeseen events like change in fund manager, takeover of the AMC, change in fundamental attributes of the scheme can impact your plan. Thus, you need to review how these changes have affected the portfolio and client goals and make changes accordingly.
If the recommended portfolio is underperforming, explain the reason for underperformance and give a solution to improve performance.
Asset allocation check
Sharp movement in markets can significantly alter asset allocation of your client. Review his investments to check if the equity-debt allocation is in line with the financial plan. Rebalance client’s investment if necessary. For example, if the market runs up by 50% in a year, you may need to shift some of your client’s equity investments to debt. It also ensures that the client’s overall asset allocation is in line with his risk-return profile. Similarly, in case of bear markets, you can ask your clients to increase equity exposure.
Measure progress
Advisors help their clients set a certain target to achieve their financial goals. In bull markets, your client may achieve target amount much before the target date. In such a scenario, it is advisable to shift his investments from risky assets like equity to low risk debt funds.
On the other hand, if you expect a shortfall (the client’s investment may not grow to the target corpus by the assigned date), you need to recommend appropriate changes to his investments.
Is the client comfortable with the risks?
It is easier to understand concepts than to implement them. While your clients may accept that investments are risky, they really understand the implications only after experiencing volatility. The last 18 months are a good example of turbulent markets. A previously aggressive client may want to trim his risky investments after seeing investments correction. In such a scenario, it is advisable to rebalance their portfolio to mitigate risks.
Life changes
Life changes such as marriage, birth of a child and job change can have a significant impact on your client’s finances. Have a detailed discussion on all major and minor changes in your client’s life during the investment review. Analyze their impact on your client’s finances. Make necessary changes to the financial plan to accommodate for the increase in responsibilities in case of marriage or childbirth.
On the other hand, you can recommend incremental investment if your client has moved to a new organization with a substantial hike or received a hefty bonus.
Take feedback
Conclude the discussion by asking your client whether he is happy with your services and how can you improve. Ask specific questions such as ‘Do you need more updates on your investments? Are you happy with my query resolution time? Do you expect any other services from me?’ Asking direct questions will get you better quality feedback and help you improve your service.
Key points
- Do your homework before the review meeting
- Break the ice with small talk to make your clients comfortable
- See if change in fund manager or fundamental attributes has affected performance of the schemes in the client’s portfolio
- Evaluate if the investments are on the right track to achieve financial goals
- Timely rebalance the investment portfolio of your clients to maintain asset allocation
- Closely track investor behavior in volatile markets to see if change in asset allocation is required
- Alter his investments in response to life changes
- Take feedback to improve your service
