It’s a thorny issue all financial advisors face. What do you say to a client when their portfolio, and the investment plan you agreed on, doesn’t surpass or match a broad benchmark like the Dow or S&P 500? Steve Blumenthal, CEO of CMG Capital Management Group, writes in the Wall Street Journal Wealth Adviser (subscription required) about this delicate topic, and how to use the opportunity to educate clients about long-term investment strategy. Writes Steve:
I was recently on the phone with an adviser who has been in the business forever, and he was scratching his head because the S&P was up 20% and his clients were calling him to complain because they weren’t up 20% as well.
As human beings we’re competitive and we want what’s best. So when clients see the S&P outperforming their portfolio they want to know what they can change to keep up. But as advisers we have to explain to them that the S&P is not a good benchmark for a broadly diversified portfolio that combines a lot of different risks.