Monday, October 12, 2009

Investment Performance vs. Peace of Mind

One of my clients is a State employee, and has his 401(k) invested with Utah Retirement Systems (URS). I'm a big fan of URS -- their funds have a history of outperforming the market, and they keep expenses at a minimum.

While preparing for my six-month review with this client, I thought it would be interesting to compare the investment performance my client's 401(k) has achieved at URS with the performance of his IRA managed by Net Worth Advisory Group. Unfortunately, this individual has only been one of my clients for a little over a year, so for now, I can only compare performance during that time period. Below is a table comparing investment performance of various asset classes from 10/10/08 to 10/09/09:

First, it looks like the funds managed by Net Worth Advisory Group had a pretty good year. Of course, one should not place much emphasis on one-year performance, and past investment results are not an indicator of future investment success. Investment results will fluctuate over time, and I told this client to not expect such favorable comparisons going forward. Frankly, my goal is to produce results that, after subtracting fees, are comparable to the market. My client was surprised by this comparison, and until I brought it up, I'm not sure he could have cared less.

The real point here is that most of my clients view superior investment performance as nothing more than a nice bonus. At the end of the day, clients hire me, retain my services, and refer me to their friends and family because they truly value the peace of mind that comes with knowing they have a passionate financial professional who is always looking out for their best interest. The six-month reviews I conduct means my clients always know exactly where they stand in relation to their retirement goals, and consequently, they have one less thing to worry about. The bonus provided by great investment performance is simply that clients may reach these goals sooner than anticipated.

1 comment:

Lorne Marr said...

A financial professional is such a great person when he really is a professional. But it's the not so experienced financial advisor wannabes that ruin the reputation of people like you. People don't trust them and are very skeptic in takign advice. Maybe that will change after this crisis since it eliminated the weak links in the business. Good luck with your career ;) Take a look at my article about insurance advisors. Maybe you'll find it useful.

Take care, Lorne