Determining how often an investment advisor should contact his or her clients is not easy. The best approach would be to customize meeting goals and expectations with each client individually. Advisors with smaller client bases may find this easier than those with larger books of business. Overall though, there are minimum goals to achieve with clients, with more frequent meetings due to individual client personalities and the time available to the advisor.
Annual or Quarterly Reviews?
The CFA Institute's Standards of Practice Handbook suggests, at the least, an annual review when it comes to reviewing a client's investment policy statement. The investment policy statement identifies the client's personal details, such as any designated beneficiaries or percentage of assets the advisor is managing for the client. It also includes specific investor objectives, such as return objectives and the client's ability to tolerate risk. Finally, it includes any specific client constraints, such as taxes, needs for income and other legal restrictions. For clients with more or less static personal situations, an annual update might be sufficient; but for others, and depending on if market conditions dictate a change in the investment policy statement, more frequent updates might be necessary or at least not be necessarily dependent on a specific calendar date to discuss any changes that might have occurred.
Beyond the more technical prescriptions that industry associations offer, common sense dictates how often an advisor should be in touch with his or her clients. The 80/20 rule may easily apply, meaning that 20% of the clients could take up 80% of an advisor's time. For instance, certain clients might be more interested in hearing an advisor's thoughts and recommendations on how to invest for long-term success. This could include clients who are familiar with the industry, or newer ones who might just be getting used to the advisor's investment style. Younger clients might also be earlier in the learning curve in financial services and, therefore, need more guidance as they become familiar with investing.
Quarterly updates certainly make sense. Ways to leverage the advisor's overall client base could include sending a general quarterly update, with a recap of the more important market developments and any performance details. More volatile market conditions may require interim updates and should cover any clients who might have experienced major ups or downs in their portfolios.
Anything that stands out from the details set out in the investment policy statement also applies, if it isn't due to stock market or financial market changes. Changes in federal or state income tax codes are included in this category, as are political updates that could affect portfolio values. Presidential elections apply, as do new laws or bills that come out of Washington D.C.
The duration of client meetings is also worth discussion. A brief update may be all that is required to put a client at ease that his or her assets are being taken care of. This could also be important for newer or younger clients just becoming familiar with an advisor's style or the financial markets in general. Other clients may appreciate in-person meetings at the advisor's office or a lunch or dinner meetings.
These days, there is also a growing list of acceptable contact methods. In-person meetings are likely the most valuable and impactful, especially when working with newer clients. In other circumstances, a simple call may do the trick, especially if a client does not live in the same state as the advisor. Quicker communications could include email, or even text messages in certain instances. Social media is generally meant for a wider audience, but individualized means of communicating are also available.
The Bottom Line
The basic takeaway from the above discussion is that an advisor should meet with a client at least annually. A phone conversation could even suffice if there haven't been any major changes to a client's investment policy statement. Quarterly meetings are more ideal, as are other updates that stem from changing market conditions or other changes to client circumstances.
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