Investment Policy, Investment Strategy and the Professional Practice

6 minute read

The Professional understands that communication with clients is of vital importance, not only in terms of the content delivered but also in how a Professional shares information.

As a Professional Practice, my team and I focus on 24/7 service. We have made ourselves highly accessible to our coaching clients, Mastermind participants, and Trade Like A Pro students believing that we deliver red-carpet service. We are fortunate to be a virtual team and thereby at less risk of hardship due to economic factors.

The events of the past 18-months have brought added difficulties as Retail Advisors and several institutions have been forced to downsize and reduce staff. As extra support personnel are eliminated, many retail consultants find themselves forced to answer their own phones. 

In Trade Like A Pro, we discuss the importance of systems and the flow of communications in a Professional Team. The majority of incoming phone calls to many practices (roughly 60% in our experience) are service-related. A Professional understands that the team should field and deliver all service-related information to the clients. The consultant should limit him or herself strictly to delivering investment policy and investment strategy.

A tremendous amount of the consultant’s time is freed by focusing solely on investment policy and investment strategy. It allows substantial improvement in dealing with the client in those two areas where the consultant’s expertise and experience come together most extraordinarily. 

The Professional knows that every client deserves immediate attention and deserves red-carpet treatment, but that does not entail the necessity for the consultant to be involved in most cases. In our upcoming Professional Practice course, we share several scripts that can help your team screen for routine inquiries and investment matters.

Let’s talk for just a moment about what we mean by investment policy and investment strategy.

An investment policy is the WHAT of the investment decision:

  • What are we going to do? 
  • What needs to be done? 
  • What should be the asset mix? 
  • What is happening in the market right now?

It answers the question of what will be done next or what is going on right now.

Investment strategy, on the other hand, answers the HOW question:

  • How do we implement this new policy? 
  • How do we allocate the managers properly? 
  • How do we change managers? 
  • How do we take advantage of the opportunities coming ahead? 

Policy deals with the much more generic, much broader issue of what is going on and what needs to be done, whereas strategy deals with the very client-specific information about how it is to be implemented and put in place.

Too often, we confuse these two and do not realize that the bulk of what we speak to clients about is investment policy rather than strategy. 

The Professional Approach To Practice Management

Consider this: Clients that have been with you for a considerable period hear the policy, and then their immediate decision about the strategy is “Yes, go ahead and implement.” True delegators, clients who want to delegate the HOW to someone else, are only interested in the policy. As soon as they agree that the approach makes sense and seems reasonable, they are more than happy to have the implementation strategy turned over entirely to the consultant.

The problem lies in the fact that Retail Advisors have taught their clients that they will be contacted one-on-one and almost always by phone whenever there is something valuable to communicate. For this reason, most clients dismiss faxes, e-mails, letters, and any group call or workshop, knowing that we will contact them personally if something is significant.

The Professional works to educate their clients to understand that investment policy is generic enough to be delivered in bulk and that e-emails, letters, and group calls or workshops are appropriate modes of communication. Educating your clients on the difference between investment policy and investment strategy is the secret to substantial growth within a professional practice. It allows you to focus your time and attention where it should be: not on the entire client base but rather on those key clients that are your strongest advocates. 

In Trade Like A Pro, we share that by taking your top 25 clients and duplicating them every year, you are looking at 50%-60% growth annually. A Professional understands this metric.

In the Retail environment, top clients get very little of their advisor’s attention. Most of their time is concentrated deeper into the book, dealing with that bottom half of the client base with service-related questions. Only by delegating all client service to the team is the consultant able to focus time, attention, and conversation with high net-worth clients. 

By delivering investment policy, the WHAT of the investment decision process in a bulk fashion (either in a workshop, teleclass, or bulk e-mail) and then dealing with the HOW, the investment strategy portion, one-on-one as necessary, a tremendous amount of time is freed up.

A perfect illustration was shown significantly by those consultants who, immediately following the market correction in March 2020, conducted teleclasses with their existing client base to explain the policy or the WHAT of the events. What has gone on? What should we do now? What is our position? 

Those who made the individual phone calls to clients called for days or weeks on end, whereas those who had trained their clients that policy is delivered in bulk were able to contact their entire database of clients in a matter of a day or two the information. They were then free to deal one-on-one with those clients who had specific investment strategy questions or concerns. Instead of making hundreds of phone calls, they were able in a matter of a few dozen calls to not only assuage their clients’ fears but also to deal specifically with those clients who had issues, changes in risk profile, or necessity to make investment decisions. They were able to concentrate and focus their time on critical investment strategy decisions while others were repeating the same message repeatedly to the individual clients.

As was stated earlier, the secret is that investment policy is always delivered in bulk, and investment strategy is always delivered one-on-one when necessary. In most cases, clients, upon hearing the investment policy, are more than happy to delegate the investment strategy or implementation to you, the consultant, and may not require any more of your time.

If you have not already, I encourage you to look into conference calls and the use of bridge lines. Newer advisors and those comfortable with technology may also want to consider video streaming technology. 

A Professional understands that one of the best ways to leverage their time and business is to train and educate their clients that all investment policies will be delivered in bulk. It is a prerequisite that they digest that bulk information before dealing with the investment strategy call, which can or will be done one-on-one later. It’s a tiny shift from the Retail mindset to the Professional mindset that can represent a significant shift in your AUM and client satisfaction.

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