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A couple of months back I wrote a post about several things I don’t do when working with clients. I talked about avoiding using leverage, not buying private investments, and not letting third parties handle client portfolios. While making choices about what not to do is a foundational part of business, deciding what we actually do is obviously more important.
So, here are some of the things I do when working with clients.
The basic stuff…
While it likely goes without saying, I do financial planning work for clients. This includes analyzing someone’s plans for retirement to see if it makes sense, can they keep affording it, and so forth. It also often includes managing a client’s investment accounts on an ongoing basis to align with their goals. But I’ve also offered some of these services separately as an hourly project since I started Ridgeview in 2014. All this work is done directly for the client without third parties getting in the way.
My work gets complicated and technology helps tremendously, but much of the work is still manual because of the complexity. That’s ironic but true.
I look at documents…
I do look at every document you send to me. These might be copies of bank and brokerage statements, mortgage statements, your trust documents, and so forth. Tech is available that can read and summarize these documents, but I’ve always preferred looking at them myself. This helps avoid mistakes and sometimes yields useful additional information.
One example is a client who emphasizes wanting their estate to avoid probate, yet I can see from their statements that some of their accounts lack beneficiaries. Or maybe there’s a trust document but none of the accounts seem linked to it. Another example is the sheer number of pages I sometimes see in a brokerage statement listing too many investments and far too many transactions. Or there’s missing cost basis, or statements don’t match with other documents. I sometimes look at spreadsheets that clients send to me because that’s their primary tool for tracking their finances, and that’s fine. I’ve used a spreadsheet for years. Still, the bottom line is there are lots of benefits to reviewing original source material, so I always try to do so.
I do a lot of manual data entry…
For reasons similar to those referenced above, I prefer manually entering data into a client’s financial plan and into other software platforms I use. Often the same tech that can read and extract your data can also prefill planning software, which is superficially more efficient. However, these systems can make mistakes that can be hard to catch, and I would end up checking everything manually anyway, so might as well go ahead and enter it that way. The details are too important to risk missing mistakes.
I try to keep costs as low as possible for clients…
Nothing is free in this life, and expenses creep up quickly in the investment world. The typical actively managed mutual fund costs close to 1% per year, while competing index funds cost a tiny fraction of that. We can debate if the actively managed fund is worth it, but if a client is paying me to manage their portfolio and the bottom line is important, shouldn’t I err on the side of lower costs if there isn’t definitive evidence suggesting otherwise? For years I’ve tried to keep portfolio expenses below an arbitrary 0.33% of account values, but I aim for lower, maybe 0.15%. All things being equal, every bit saved here means more money staying in the client’s portfolio. This applies to custodial fees as well. I’m sometimes overly sensitive to even a $10 transaction fee on some funds at Schwab, so most of what I buy for clients has no transaction fee.
I customize portfolios…
This doesn’t mean complicated and expensive. Instead, it means keeping my advice for clients straightforward and tailored to what the client needs and wants. One example is reviewing a client’s investment ideas and sometimes adding them to the portfolio. Another is how some of my clients are interested in SRI and ESG investing, and I incorporate appropriate screens into their investment model. Another example is sometimes using individual bonds and bank CDs to cover a client’s shorter-term cash needs.
Lots of firms in my industry use model portfolios and stick a client into Portfolio A, B, or C based on standardized metrics; they’re customizing a client to the firm’s needs instead of the other way round.
There are enough investment options available to customize, so I don’t see a reason not to so long as we maintain good diversification and low expenses. This leads me to treat each client uniquely versus cramming them into a larger model. While this can be inefficient compared to the cookie cutter approach, I think it works better for clients in the long run.
I check things often…
What sort of things? I check my email a lot, which means I tend to get back to people quickly. I check the markets maybe too much, but I follow financial markets like others follow sports, so it’s work that doesn’t always feel like it. I check client account balances to make sure we can cover distributions, and to check for things like maturing CDs and bonds (systems also alert me, but I often beat the alerts). I read research reports each workday and also check the news which usually means “traditional” news sources like the Wall Street Journal. I’m boring in this way because I limit my information intake to reduce distractions (it’s a work in progress!).
Last but not least, I do care...
You might get this sense already, but I care about my client’s financial wellbeing. I want them to be successful. And I love it when we use money from a client’s investment performance to pay off debt, give gifts to family and charity, buy a car, or otherwise improve the client’s situation. It’s gratifying to help make that happen.
Also, I care about feedback. I want to keep growing and improving my skillset but also my business and service offerings. If there’s something we could be doing differently, please feel free to say so. If there’s an extra service we might provide, please let us know.
Have questions? Ask us. We can help.
