We explore how advisors can effectively present portfolio performance to clients, especially during periods when their investments underperform relative to major market indices like the S&P 500. Through practical examples and a structured approach, we demonstrate how to transform potentially difficult conversations into relationship-strengthening opportunities.
• Avoiding common pitfalls like lengthy diversification lectures or ignoring client concerns about underperformance
• Framing performance discussions around two key questions: is the discrepancy due to fund issues or asset allocation issues?
• Comparing individual funds to appropriate benchmarks rather than broad market indices
• Using tangible examples like comparable Vanguard funds to help clients understand proper performance evaluation
• Explaining asset allocation strategy in terms of providing optionality and consistency rather than just growth
• Leveraging both underperformance and outperformance periods to build trust and prepare clients for market volatility
• Conducting "lifeboat drills" during good markets to set expectations for inevitable downturns
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