How can you set realistic investment return expectations for your clients?

Il faut effectivement bien cerner le profil du client. Savoir quel est le niveau d’aversion au risque et quel est le besoin immédiat en trésorerie.

Investimentos são como ferramentas em uma caixa de ferramentas. É impossível dizer qual a melhor ferramenta sem saber qual a necessidade da pessoa. Da mesma forma que um martelo seria melhor para bater um prego, uma renda fixa pós fixada seria melhor para quem pode precisar do dinheiro a qualquer momento. Assim, entender as circunstâncias e objetivos de cada um é fundamental.

It goes without saying you need to understand your clients first and foremost. Although most people have the same goals, ie retirement, college planning, home purchase, etc, it's important to know each person's risk tolerance. Everyone is a "growth investor" until the market corrects and they lose portfolio value. Understanding client psycology is equally important as market knowledge.

It's always an interesting topic to discuss. Clients have varied expectations for their portfolios. Some are realistic to achieve while other are distant to reality. We focus on three points to set realistic expectations 1- What great investors have achieved? If we take ex of Warren Buffet, he has delivered a CAGR of 20-22% over the last 6 decades. 2- How benchmark is doing? Say if we outperform Nifty by 4-5% that's a very good performance. 3- Always being truthful with the client and tell them "What we expect from investments'' If she understands all three points and respond well, we think now she is well educated. All this education helps her in forming realistic expectations.

In my experience, one of the most important things when working with clients is setting expectations as low as possible. I help them plan as pessimists so they are ready for the worst and will most probably have the joy of exceeding expectations. Risk profiling is good, but most of the tools used to define that are not that useful - this is the second point I stress and try to dive deep before putting pen down to paper with clients.

Conhecimento é a base para a confiança e segurança nos investimentos escolhidos. É necessário alinhar expectativas, de forma que os fique claro o porquê de cada escolha. Do contrário, baseando-se apenas em rentabilidad, a frustração é questão de tempo. É preciso entender e fazer o básico bem feito e lembrar que a simplicidade é o último estágio da sofisticação.

Always let your clients understand that historical information is relevant but it may always not be true that the same conditions will pertaining to the investment they undertake. its a guide not a rule.

It is a guiding principle to always be honest with clients and make sure to clarify in detail using scenarios, charts and several other methods. I have found that real-life client stories are the best way to communicate complex concepts, as they help the client to relate and understand the decision-making points vicariously.

When it comes to investing, it's common that everyone has their fair share of doubts on many aspects. This is where educating plays a vital role. In the long haul of investment journey, this knowledge will also contribute to plenty intangible benefits such as expectations alignment and investor behaviour — something that cannot be learned through textbooks. The best part of this is that the knowledge and experience compound. An investment in financial assets may pay some good interest. But, an investment in knowledge pays the best interest.

Guiding and educating your clients, whether industry, securities, or tax consequences, goes a long way! It's always music to my ears when a client says, "Wow, I haven't thought of that; good question!" Additionally, this is especially true for lower middle-market and Main Street M&A and capital raise, be creative and flexible! While there are regulations to consider, educating them and helping them select an investment and structure contributing to their goals goes a long way.

Estar disponível é importantíssimo. Em um mundo onde toda notícia é um fim do mundo diferente, é preciso manter a carteira sólida em qualquer cenário. E isso só é possível quando não se age na emoção do momento e se mantém o plano. Assim, estar disponível para que a estratégia fique clara e para que ruídos não interfiram no plano é fundamental.

Many people thought the hardest part of investment advisory is managing investments. No, it's managing the investors. The key lies in recognizing that no matter how sound the advice or excellent the performance, it will be of no value to a client who doesn't follow it or stay invested long enough to reap the benefits. I bridge this gap through clear and honest communication, ensuring that clients understand what to expect and addressing the psychological barriers that may hinder them from following sound advice. Communication also includes clarifying the investment strategy, setting realistic expectations, and guiding clients on how to navigate periods of volatility and market cycles. Effective communication can never go wrong.

Cada investimento serve para o seu propósito. Alguns vão render mais e serão mais voláteis. Algum serão super seguros e rentáveis, mas não poderá resgatar até um determinado prazo. Outros terão liquidez diária, mas a rentabilidade será baixa. É preciso entender como funcionam os investimentos e alinha-los aos objetivos e circunstâncias de cada um. Assim, todos saem felizes e, principalmente, mais ricos.

In my experience, regular review with my clients is as important as any part of the financial planning process. Why? Because, circumstances may be different and expectations can change. For example, no one was talking about fixed deposits 5 years ago due to the low interest rate environment. Now? People don't mind parking funds in fixed deposits for the decent interest without exposing to any volatility. The Apollo rocket was off course 93% of the time and only got to the moon due to constant course correction. This is the same logic as to why financial planning is a verb and not a noun. A plan is a snapshot. The planning is a constant course correction to achieve the target.

Before you review your clients' expectations, you need to set realistic ones. The "growth investor" quickly becomes conservative when markets correct...while the income seeking client will always wonder why their portfolio isn't growing enough. Setting reasonable expectations at the beginning of the relationship is important to establishing long term client commitments. If they don't buy into your process early, then it will only cause issues down the road...especially when markets get bumpy.

A simplicidade é o último estágio da sofisticação. As pessoas tem a tendência a querer complicar as coisas. Elas acreditam que porque viram no jornal ou porque um colega de trabalho disse algo que agora deveriam mudar todo o plano racional e investir em algo diferente guiados pela emoção do momento. Esse é um erro grave e que acontece caso não esteja claro o porquê da escolha de cada investimento. É preciso ter clareza para que se tenha paz e que se siga o plano de maneira racional.

Having the volatility discussion upfront, before any investment is made, is a great way to prepare clients for whats to come, Volaitltiy comes hand in hand with inflation beating returns, but by having these conversations early on in the relationship, we can prepare our clients for whats to come and also discuss how they are likely to react, along with what our reaction will be. This way, when markets take a tumble, which they will, clients are prepared and so are we, and we can help stay the course but going back to the answers they provided initially.

En nuestro equipo de consultoría, enfrentamos el desafío de establecer expectativas realistas de retorno de inversión (ROI) para nuestros clientes. Adoptamos una estrategia que no solo enfatizaba la transparencia en nuestras proyecciones, sino que también incluía premiar a nuestros clientes por su compromiso y confianza. Implementamos un programa de lealtad que ofrecía beneficios incrementales, como sesiones de consultoría sin costo para el y/o un referido, también acceso exclusivo a herramientas y reportes avanzados. Esta aproximación permitió fortalecer la relación con nuestros clientes, demostrando nuestro compromiso con su éxito a largo plazo.