You have spent years building a successful advisory business only to see market events shock and paralyze your clients. What are advisors saying and doing in order to retain clients and to keep them focused and on track? Here are some top-of-list suggestions:
- Taxes, fees and your clients. In a world that seems out of control, focus on the things that you can influence for clients. With assistance from the IRS this year, everyone age 70 1/2 and older is empowered to take more control over their finances. In addition to the temporary suspension of required minimum distributions from IRAs in 2009, don't forget about the ability to convert your traditional IRA to a Roth IRA in order to lock in current tax rates. Also remember that you have until your filing deadline, including extensions, which would mean October 2010 for a 2009 tax year conversion, to reverse this decision if, for example, the value of the account continues to decline. This is a great opportunity to give your clients control.
- Consolidation of client assets with one advisor is essential for providing top notch service. One source conveying one message allows an advisor to deliver a clear and concise strategy. The coming year will provide a perfect opportunity to show your value as an advisor. Normally advisors need to be vigilant in terms of reminding clients to take their required distributions from IRAs. With 2009 distributions temporarily waived, you can help improve your status with a client who might have IRA assets held away from you by alerting them to stop any automatic distribution arrangements to avoid an unnecessary withdrawal and tax liability. If a client has already taken their 2009 distribution, have no fear, as you can direct them to redeposit it to the account if within the 60-day rollover period.
- The importance of creating a guaranteed stream of income for some portion of a retiree's income. Now more than ever, the value of a fixed paycheck within a portfolio should be clear to clients. Guarantees are also built into products such as structured notes, traditional and equity-linked CDs with FDIC insurance and variable annuities. We make projections regarding rates of return based on history. We also note that historic returns are no guarantee of future results. These hybrid solutions allow advisors to add some predictability to a portfolio.
- Keep clients focused on the big picture, particularly with long term investment performance, volatility, correlation, tax rates and inflation. Clients engage you for your ability to provide competent counsel. How many investors are aware that the highest marginal tax rate was more than 90 percent as recently as 1963? Using a long term perspective will prove essential in order for clients to stay the course. The projections we make as advisors have to be based on realistic assumptions.
- Manage your clients' expectations in terms of the benefits and value of your services. As much as a prospective investor interviews an advisor before entering into a relationship, an advisor needs to make sure the investor will be a good fit as well. I think an advisor has to get a prospective or even a current client to "buy-in" to his or her philosophy. If the advisor and the client are on the same page from the start, it will make for a much more rewarding relationship.
As the turmoil continues to unfold, and investors become shell shocked, advisors who incorporate these tenets into their mission statement will find their services in great demand.
Mark A. Cortazzo, CFP is senior partner with MACRO Consulting Group in Parsippany, N.J.
