Pro-Am

How do professional advisors start off 2018 vs amateur advisors who think they’re pros? I can speak to this from experience, having first been the latter and now surrounded by great examples of the former…

Professionals take this opportunity to manage client expectations, pointing out that 2017’s returns were above average (by about triple) and unlikely to represent an average annual return going forward.

Amateurs use the returns of last year to raise more money. “I made you 18% in 2017, let’s talk about the assets you’re still holding away from me. And maybe some referrals.”

Professionals maintain allocations through the start of January, with perhaps some rebalancing.

Amateurs turn over positions, incurring commissions and possibly taxes, and start to talk about the “playbook” for the New Year.

Professionals point to the holdings that didn’t keep up with US and global stocks as a teachable moment and a reminder that for strategic asset allocation to work, not everything can be going up at the same time.

Amateurs look for replacements for the holdings that are “disappointing” the clients, switch out managers based on last year’s performance and cut down exposure to asset classes that aren’t “working.”

Professionals look at valuations and trends to discern what’s currently occuring.

Amateurs read “10 Surprises” and CIO Outlook pieces to divine what people are predicting will occur.

Professionals review client financial plans and have uncomfortable but essential conversations with households that are falling short of their stated goals.

Amateurs traffic in “Five Hot Stocks for 2018” and send out three-year return charts for funds they want to add to portfolios.

Professionals talk to clients who are far outpacing their goals about reducing equity exposure.

Amateurs talk to clients about adding new hedging strategies and more alternatives.

Professionals admit they don’t know what the new year will bring, and focus instead on the durability of what they’re doing.

Amateurs have year-end price targets and can’t-miss sector bets.

Professionals will keep clients focused on the important stuff and get the job done in 2018, come what may.

Amateurs will direct client attention to all the wrong metrics and inevitably fall short, which means more prospecting come 2019.

Links below.