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Promises Made? Optima Group’s Perspective

A cardinal rule of wealth and asset management is not to make “promises” about future performance. How have wealth managers done in keeping clients satisfied while following this rule? It turns out that depends on what you mean by “the promise.”

The recent crash has exposed new risks for investors.
• Do their short-term needs exceed their current liquidity, forcing them to sell long-term assets at the worst possible time?
• Do they have the funds and resources to take advantage of new market opportunities?
• Are they overwhelmed by market noise, asking their advisors to transact on rumors instead of facts?

All of us know better than to promise future performance and absolute control of risk. But, do your clients understand that, to the best of your abilities, you are helping them align their portfolios with their life needs? Do they feel assured that no matter where the markets are moving you are doing the “right thing?”

This is a testing time for wealth managers. When all boats were rising it was easy for clients to feel assured. But since the COVID-19 precipitated an economic and market crash we are beginning to see “money in motion.” 

Over the last few weeks, we have gathered enough anecdotal evidence to see that firms that emphasize financial planning along with their investment prowess are doing fine. Those that focus primarily on performance are starting to lag. And, those that helped their clients invest in seemingly safe securities, where clients did not completely understand the risks, are now “in trouble” and are facing very tough client questions and defections. 

So, even in this time of crisis, it is the time for well-run firms to tell their story. Investors whose wealth management does not align with their goals are switching firms. Investors who feel they were misled about the risks in some of their investments are angry. But, even with almost all portfolios contracting, investors who feel their advisors built their portfolios to weather the storm are staying put, and frankly some are expanding their relationships. Planning-oriented firms, using consistent and high-quality client communications, are even finding this is an opportune time to grow. 

While you are busy aligning your business with new realities, if you are well-positioned, and have a great story to tell, now is the time to tell it – often and loudly. We can promise that is a decision you will not regret. 

Stay safe and healthy,

Ken Hoffman
Managing Director and President

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