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Mentor RIA Consulting

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What Clients Really Want

Posted on May 15, 2019 at 5:57 PM
A recurring theme in the financial industry media is pundits offering assertive statements (opinions) about what clients really want. It should be obvious by now that clients differ in what they want and it is not just as simple as getting the best investment advice. Recently, speaking with an experienced adviser, I heard first-hand what one client said during the course of a conversation with the adviser about the client’s investments in the context of whether to rebalance to the desired allocation.
What did this client say he wanted? Just low risk, high return and to not pay taxes. These certainly seem to be desirable goals. The real question is to what extent these goals are attainable in reality and what exactly are the tradeoffs among the goals which the client might be willing to make. We know that low risk and high return don’t always come together in an investment and that high return usually means that at some point there are going to be taxes. 
In this particular case, the client was balking at realizing a few thousand dollars in long term gains if the account was to be rebalanced to reduce risk in the portfolio. The same client recently had incurred tens of thousands of dollars in taxes to increase his cash position when fearing a market drop which did not occur. Why do you suppose clients so quickly forget mistakes they make (and losses or taxes they incur) and then turn around and complain about the lower cost of simple, relatively inexpensive steps to reduce risk? Quite possibly it is because of a tendency not to listen to advice from their professionals and instead to rely on emotion and opinion to make their decisions. What do you think?


Categories: Clients, Investing

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