Blue Chip Issue 86

CLIENT ENGAGEMENT | Communication
BLUE
CHIP
What is obvious to us is not necessarily obvious to the client.
When my mother received the Porsche keys, she simply did not
realise they weren’t labelled Toyota. Similarly, we as planners
might think some things are obvious when in fact they are not.
Think of the difference between total investment charge (TIC)
and effective annual cost (EAC); strategic and tactical asset
allocation; passive and active; growth or value style investing.
What is important to us is not necessarily important to the
client. As planners, we may be proud to know that in our client’s
living annuity they own our best offshore equity managers on
asset swap at no extra fee… but the retired couple may simply
want to know that their portfolio will give them a healthy balance
so no single event can jeopardise their retirement income and
that it will grow sufficiently to protect them and their income
from inflation. How we “built the engine” may not be important
to them.
As planners, beware of getting in the way. My partners and I
stress that we must be careful not to impose our biases on the
client. When I called Avis to query the Porsche they were puzzled
at our disappointment. They thought the Cayenne was an upgrade:
a better car for the same price. Because they didn’t understand
what we wanted from our journey, they gave us their “best view”,
not something best suited to our goals.
Now here is the interesting part: the above is what we expect
of ourselves as planners and as a firm.
Irrespective of their interest in the engine, all clients will
experience the drive. For example: how and when tax is paid;
liquidity restrictions on the investment; performance, volatility
and so forth. A conversation about the drive which sets the right
expectations is crucial. I will return to this shortly.
How do we tie this metaphor together? At Omega Capital we
call our conversation one about a client’s life and money.
The investment vehicle falls in the “money” side of the conversation.
We would suggest that a range of high-quality investment vehicles
that a client can rely on to perform is… table stakes. It is the minimum
a quality planning firm should bring to the table.
Then there is the “life” side of the conversation: our client’s
journey. What are their goals, fears, aspirations? Who are the
people on this journey with them? What is difficult for them to
action or even to talk about? What compromises are they willing
to make in balancing life and money goals? What are the hard
questions we, as their advice partner, need to ask? Or the tough
things we need to coach them towards?
Who is most competent to speak to that? Our client. So, we
try to “shut up and listen”.
Against that framework, as planners, we feel the following is
important to be aware of:
What about our clients?
Using our metaphor there are a few crucial things. As I mentioned
above, we may not discuss “the engine” but we absolutely discuss
“the experience” of the drive.
A client must know what to expect from their vehicle. What
can the volatility be; what time horizon are they investing for (and
assessing the investment over) and what are realistically possible
returns over shorter and longer periods. If we get the expectation
wrong – the relationship fails and likely also the plan.
A client must know how to “drive” their vehicle(s). What
contributions did we plan for over time? Or,
inversely, how much can a retired client draw
from the portfolio? Critically, will they remain
invested when the journey gets challenging –
as it will at some point(s) along the way.
The best plan can be destroyed by an
investor’s bad behaviour.
In closing, after a conversation with us
about life and money where a client has
made decisions and executed them, what
would we want them to “drive out” with? We
expect that they would know:
• Where they are going: their plan.
• What ride to expect: volatility, time horizon.
• How to “drive” their investment: drawdown,
contribution, staying invested.
• Lastly, to the extent it adds value for them:
how the engine works.
Johannes Landman,
Financial Planner and
Partner, Omega Capital
www.bluechipdigital.co.za
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