Maximizing the Potential of Client Meetings

Dana Dakin: Article in the Family Office Exchange

Meetings between clients and investment managers are an extension of the investment process itself. Good meetings help clients to be better investors, and they help managers to build long-term business relationships.

The goal of every meeting is to have a meaningful dialogue in order to increase the client's understanding of your investment approach and stabilize comfort. Ironically, the most effective way to accomplish this is to take the opportunity when performance results are good to talk about the issues that are concerning you and the steps you're taking to address them. This gives you the credibility you need to discuss what's going right when performance lags expectations.

Even the most sophisticated clients bring mixed feelings to a meeting. The fear and greed intrinsic to all investing, and the uncertainty of what the future will bring, generate intense emotions which are potentially explosive. Recognizing this, it is important to establish a set of communications procedures that will help you create meaningful dialogues with your clients as well as help build understanding of your investment process.

Establishing a Foundation

In an ideal world, investment objectives would be defined and agreed upon by the investment committee, formalized in a written statement of investment policy, and discussed openly with the investment managers competing for the account prior to hiring. But in an age of "beauty contests" and "horse races," real clarity is all too infrequently achieved at this juncture. So it is imperative that investment objectives be fully understood by all parties and translated into a tracking format at the outset. This one simple concept adds significantly to a "no surprises" atmosphere and is the foundation for all communications over the course of the entire relationship.

Developing an Agenda

The meeting agenda is another important communications tool in successful client/manager relationships. It should be determined in collaboration with the client. Agendas bring focus; they insure that presentations start at a meaningful information point and cover what's important. Established in advance, they also mitigate the "entertain" or "sell" functions which can infiltrate client meetings. Lastly, they support the "educate" and "exchange" functions which help keep investment committees informed and comfortable. In the words of one consultant "We're looking for a money manager who does more than pay lip service to the concept of meeting with clients fairly regularly. An excellent manager means somebody who, when he's having these meetings, is dealing in a relevant way with his client. All too often I find somebody goes on and on about where the economy is going and things like that. Also, they often have a canned presentation rather than tailoring it to us. What I would hope for is that they would explain their product, explain their methods of operation and talk in clear, straightforward terms to the people at hand.

The Education Imperative

It is important to review results over a meaningful period of time to educate the client about what types of decisions were made, the reasons for making them and how they contributed to overall performance. It is then possible to move into discussing the logical framework for the current portfolio positioning and expectations for future performance within different scenarios.

A meeting is successful when clients can reinforce in their own minds the logic of the decision-making process and connect to that process actual performance results. The bottom line: Do they still feel good about hiring you?

Good meeting procedures actually contribute to long-term performance, because money managers are motivated to perform for strong clients who exude a sense of partnership and fair play. Clients, on the other hand, are motivated to stand behind managers who generate trust through consistent, informative communications.

A Proposed Meeting Format

1. The Opening

  • Establish the timeframe for the meeting and encourage questions and discussions

2. The Past

  • Address the investment outlook presented at the last meeting and compare to actual results
  • Review subsequent action and shifts in holdings
  • Assess portfolio changes within the context of your investment philosophy:
  • What worked
  • What did not work and why
  • What you did about it

3. Present absolute results for total holdings and appropriate portfolio groupings:

  • Relative to short-term expectations
  • Relative to your long-term bogey
  • Relative to the appropriate market indices
  • Relative to the competition
  • Show performance attribution:
  • Which portion of the portfolio contributed to gains? Which to losses?
  • How do performance results relate to your philosophy?

4. The Future

  • Briefly review your investment outlook
  • Show how your current portfolio is positioned to capitalize on that outlook
  • Summarize how you expect to continue to meet long-term objectives
  • Introduce emerging ideas and information about your firm.

5. The Close

  • Review the key points
  • Solicit questions to assure client understanding and continued endorsement
  • Thank the client for the meeting.


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© 2008 Dana Dakin, All Rights Reserved