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Client loyalty is essential to sustainable growth. Studies1 across a range of industries have shown that it is five to seven times more profitable to retain an existing client than to add a new one. To retain clients, you must cultivate loyalty. And to cultivate loyalty, you must build trust.
One of the best ways to build trust is to consistently deliver clear, insightful investment communications. This brief article will tell you how to make the most of your quarterly performance report and your off-cycle investment communications.
Data is essential, but data alone is not sufficient
Without comprehensive analysis that describes how your firm has delivered for clients, even the most data-rich quarterly performance reports produce limited benefits.
I learned the power of investment reporting and communications during my tenure as director of marketing for the fund analysis and research group at Fidelity Management & Research Company. The group’s charter was to support Fidelity’s investment consultants as they kept the firm’s intermediary and institutional clients informed about Fidelity’s funds.
In my role, I saw firsthand how clear and insightful analytical assessments of overall portfolio performance build high levels of client trust that withstand the test of time. Your high-net-worth clients will appreciate similarly accurate, informative, and transparent communications from you, and that appreciation will show.
To set the stage, write a cover letter that provides meaningful context
Your quarterly report’s cover letter should be a synopsis of your story. I liken it to a set of CliffsNotes. From the cover letter, your clients should easily discern the following:
- What you consider to be the top two or three market and economic events of that quarter
- All significant or deliberate changes to asset allocation
- Any changes to positions and the reasons for those changes
- Performance for the entire portfolio, net of your fees, and how that compares to relevant benchmarks
- Highlights of what contributed to or detracted from overall investment return
Review your cover letters to make sure they address all five of these points.
1 "Companies Don't Succeed—People Do!", Graham Roberts-Phelps
