Model Portfolio & SMA Strategists Showcase - Flipbook - Page 43
SMAs & MODEL PORTFOLIOS
to deliver systematically rather than
sporadically.
The specific numbers vary by study
and shouldn’t be quoted to a client
as guaranteed additive return. But
the framework itself is worth adopting
in client conversations, because it
turns “trust me, this is worth it” into
“here’s specifically what you’re paying
for, broken into parts, and here’s the
research behind each part.” That’s a
materially stronger position than an
appeal to general expertise.
WHAT TO ACTUALLY SAY
A version of this conversation that
tends to land well makes three
moves in order. First, name the shift
plainly rather than downplaying it:
“I’m changing how your portfolio
gets managed day to day.” Second,
explain the mechanism in terms of
what the client gets, not what the
advisor is delegating. Third, and this
is the part that’s easy to skip, be
explicit about what doesn’t change.
The advisor is still the one who
chose this manager, still monitoring
whether it’s performing as expected,
still the person the client calls when
something changes.
What doesn’t work, and tends to
undermine trust even when the
underlying decision is sound, is
vagueness about the mechanics
or evasiveness about fees. A client
who later discovers, through their
statement rather than through their
advisor, that there’s a new layer of
manager fee or platform fee they
weren’t told about in plain terms will
reasonably wonder what else wasn’t
disclosed.
HANDLING THE “WHY AREN’T
YOU MANAGING MY MONEY
YOURSELF” OBJECTION
DIRECTLY
Some clients will ask this version
WATCH OUT FOR
Silence is the
expensive mistake
A client who discovers a new fee layer on
their statement before hearing about it
from their advisor will reasonably wonder
what else wasn’t disclosed. The feestacking transparency discussed earlier
(p. 24) isn’t just due diligence. It’s the raw
material this conversation needs to survive
contact with a client’s next statement.
of the question outright, and it
deserves a direct answer rather than
a deflection. The honest answer, for
most advisors, is some version of this:
portfolio construction and monitoring
at the level institutional managers
do it full-time is a specialized job,
and doing it well for every client in a
growing practice competes directly
with the time needed to actually know
each client’s full situation well enough
to give good advice in the first place.
COMMUNICATING THROUGH
MARKET STRESS SPECIFICALLY
The value of this repositioning shows
up most clearly during volatility. When
markets are falling and a client calls
in genuine distress, the worst version
of an advisor’s response focuses
on defending the specific holdings
or the specific manager’s recent
performance. The better version uses
the moment to reinforce exactly the
value proposition this chapter has
been building toward. Your portfolio is
being actively managed through this,
with tax losses being harvested and
allocations monitored against the plan
you built together, and none of that
requires either of you to guess at the
right individual trade to make today.
It helps to have a name for what
the client is experiencing, not just
a reassurance. Investor-education
materials across the industry lean
43
on a widely used “cycle of investor
emotions” framework: optimism
and excitement building toward
euphoria near a market top, followed
by anxiety, denial, and panic near a
bottom, before the cycle turns back
toward hope and relief on the way up
again. Naming where a client sits on
that cycle, out loud, does two things
at once.
It signals that the advisor has seen
this exact emotional pattern before
and isn’t alarmed by it, and it gives
the client a framework for recognizing
their own reaction as a normal, welldocumented part of investing rather
than a unique crisis. “This is the
panic phase of the cycle, completely
normal, and historically the point
where selling does the most damage”
lands very differently than a generic
encouragement to “try not to worry.”
THE COACHING ROLE, MADE
EXPLICIT
Freed from day-to-day security
selection, the highest-value use of
an advisor’s time becomes the work
only a human relationship can do:
helping a client stay invested through
a downturn instead of selling at the
bottom, catching a major life change
early enough to adjust a plan before
it causes damage, and coordinating
investment decisions with tax and
estate considerations a portfolio
manager several steps removed from
the client would never see. This isn’t
a consolation prize for giving up stock
picking. For most advisors’ actual
client relationships, it was always the
more valuable half of the job.
Multigenerational and estate
coordination deserves specific
mention here, because it’s one of the
clearest places where an outsourced
portfolio manager’s view stops and an
advisor’s view has to pick up. A model
or SMA manager sees one account,
