I get annoyed when I go to step out of an elevator and two or three people try to rush in before I can get out. It’s the rudest thing. Their mothers are to blame. The proper etiquette is to allow the other folks out first and then enter. It’s a simple courtesy that everyone should practice. When you are standing outside an elevator waiting for it to open, show a little respect and take one step back instead of two steps forward. It will reflect well on your mother.

Managing Discontent

Something similar is going on when a client expresses discontent about the performance of an investment. Don’t interrupt with seven reasons why they are wrong. Don’t rush into a defense. Let them get it all out, or frustration will turn to vitriol. Stopping the flow of vitriol only backs up the toilet. You want to get a good clean flush. Instead of defending, say, “Tell me more. I’d probably feel the same way. What else is on your heart?” Keep probing until you are confident the client has got it all out of his system.

Keep the Plumbing in Good Working Order

Now, here’s how to properly flush. Go back to the original decision and thoroughly re-explain the merits, risks, and features of the investment. Make sure the client fully understands how it works, how it intends to make money, and what could go wrong. Next, discuss in detail the due diligence you and your firm conducted before adding the security to your platform. You took a product course, you did a site visit with the sponsor, you read the prospectus, whatever. Be thorough. Then, discuss why the investment was selected for the client’s portfolio and how it fits into the over all plan. Review the criteria used to make the decision to move forward with it. Finally, give your own assessment of it. It’s okay if you agree with the client, and it’s okay if you don’t.

Never Defend Performance

Remember, you never have to defend performance. The structure of the investment, the quality of the management, and the ever-changing market forces and economic conditions determine return, not you. These things are out of your control, and you are not responsible for them. There are only three things you have to defend: 1. whether or not you did proper due diligence on the fund before offering it to your client; 2. whether or not you fully disclosed the details of the investment, including its merits, features, and risks; and 3. whether or not the product was both suitable to meet the client’s objectives and in the client’s best interests at the time. If you did these three things right and the investment still did not turn out, then that is just how risk shows up in a portfolio. The client will have to accept that, this time, things didn’t go his way. If he isn’t up for the risk, then change his risk profile and reorganize the portfolio accordingly.

No, You First!

When a client comes in for a quarterly review, I have to remind myself that she hasn’t seen me for three months, and she probably has questions, things to discuss, a need perhaps, or something she wants to accomplish in the meeting. Let the client get off the elevator first before you rush in. After a half hour of pleasantries (no kidding), I open my notebook and take out a pen. “I have a number of things I’d like to cover today. Is there anything you’d like to do? Let’s cover your list first.” This always meets with approval. I carefully take notes, ask questions to make sure I understand her thoughts and concerns, and then initiate any action items. After we have thoroughly worked through the client’s list, then we turn to mine. The client is always eager to get to my list, and will listen attentively once her list has been put to bed.  It’s a small but effective courtesy.  Extend it every time.