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Don’t Avoid the Performance Talk

Eric Clarke, CEO of Orion Advisor Services, believes that financial advisors are doing a disservice to their clients by missing out on a critical opportunity to demonstrate value. How? By avoiding the “performance talk.”

In a time where the conversation has strayed almost entirely from performance to goal-based benchmarking, Clarke has identified a group of advisors nationwide who are willing to share their approach of reviewing performance reports with clients. In this exclusive WealthManagement.com series, we will hear firsthand how these advisors are re-prioritizing performance reporting in unique ways that empower clients to take control of their investments. For our first foray, Clarke talks with advisor Jim Boulay of Lutz Financial:

Education, education, education.

It’s not a line from a seminar for high-school teachers or an advertisement for an online college. It’s the mantra of Lutz Financial’s Managing Member and Investment Advisor, Jim Boulay, as he summarizes his thoughts on how to best talk with clients and help manage their expectations regarding portfolio performance.

“There’s no way to make profits by guessing,” Boulay says. “No one knows.”

But rather than creating a laissez faire attitude because of market unpredictability, Boulay instead uses the opportunity to educate clients about why their portfolios are performing in such a way, and increase their knowledge so they can be more prepared for the future.

However, Boulay doesn’t educate clients by pushing alpha and beta analysis in front of them. According to Boulay, maybe only 5 percent of clients understand those terms enough for the conversation to be profitable, and usually that occurs on the institutional side, not with the individual investor. Risk and volatility are important issues, but investors react best when the conversation is kept at a high level.

Boulay believes that the best way to interact with clients about their performance and risk is to give them the keys to their information with unlimited access.

Treating Each Client as an Individual

When it comes to addressing clients’ individual needs, advisors should focus on education first, which will in turn empower clients to take control of their own information. To do this, Boulay’s firm uses an online client portal, providing clients with access to performance reporting and portfolio data anywhere, anytime.

“Part of our decision to upgrade technology platforms was to keep up with the Joneses,” Boulay says. “But at the end of the day, a technology change is to enhance the client experience. Clients deserve transparent performance reporting, all the time, at their fingertips.”

In fact, the portfolio accounting software implemented by Lutz does more than allow clients access. It also gives the advisors the flexibility to customize their reporting to fit the individual needs of each client.

In Boulay’s view, any deviation of performance should be explainable to a client. It’s important that advisors have the knowledge base to explain any deviation or questions about portfolio returns to investors. And even though the typical client doesn’t worry about intricate levels of performance, it’s just as important that an advisor’s firm has the ability to offer a report displaying a portfolio’s performance if a client requests it.

“Reports need to be modified per client. Most clients want to see performance by total, but others want details and to see asset class performance, or even the assets themselves,” Boulay says. “The beauty is that we can create those reports and make them available in their client portal and quarterly report if they ask for it. We can build the report, and then enable it for the client to view themselves.”

Addressing Client Questions

Of course, not all questions a client has about their portfolio and returns can be answered by logging into their client portal. In many cases, one-on-one meetings are the most critical times to ensure a client has a solid understanding of what’s happening to their investments.

“Financial planning is not limited to accounts. What we do is a very personal thing. You have to get naked in front of your advisor. Trust is a huge deal,” Boulay says. “As advisors, we need to be technically competent. Our team is technical, and we manage money extremely well, but we add value around the portfolio.”

Educating clients on a particular performance methodology is also a client-by-client decision. The level with which the client desires or needs to understand the depth of the firm’s methods is determined during in-person discussions. For Boulay, that means listening to the client, asking them what’s going on in their life and what they want to accomplish in the future, and steering the conversation from that starting point.

First and foremost, says Boulay, an advisor’s job is to educate the client, plan, allocate funds, and be diversified.

The most important aspect of explaining performance to a client is about making sure both the advisor and the client are on the same page and are committed to the same long-term investing strategy. It is then, after educating, providing transparency, and empowering their clients to take full control of their financial wellbeing that the advisor’s value can truly shine through. 


Eric Clarke is the CEO of Orion Advisor Services, which provides software as a service and portfolio accounting services to registered investment advisors. 

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