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Making the match: Bringing client personality and investment strategy together

by Jun 19, 2014Advisor perspectives

Making the match: Bringing client personality and investment strategy together

by Jun 19, 2014Advisor perspectives

Carla Zevnik-Seufzer • Greenfield, WI
ClearStep Financial Partners • Harbour Investments Inc.

Just as every client has a distinctive personality, so do investment strategies, says Carla Zevnik-Seufzer, founding member of ClearStep Financial Partners in Greenfield, Wisconsin. Finding the right “personality” fit is critical to client satisfaction and retention.

Proactive Advisor Magazine: What is your overall client philosophy, Carla?

Maybe it stems from my early background as a teacher, but I find that one of the most important factors in developing a sound financial and investment plan is taking the time to truly get to know each and every client. What are their values? What is their financial literacy? What is important to them in a broad sense? What are the family dynamics, religious faith, dreams for the future?

How does this help you put together a plan?

It plays out in many ways, perhaps most importantly in ascertaining risk profiles for clients. Numbers are valuable, but each individual is not just a number. Has someone made a major financial mistake in the past? Are they afraid of another black swan market event?

I tell clients that it is never too late to get on a sound financial path. We all have stumbling blocks in our lives and we can learn from them, overcome obstacles, and make our lives and our finances stronger and more effective.

How does your investment approach play into this?

Active management can be made up of many different strategies and combinations of strategies that are designed to work over a full market cycle. Active strategies, in the right allocations, can work well in any investment environment, but they can react differently in roaring bull markets, down markets, and sideways markets. It is important for clients to know they are working with a firm that can refer them to third-party money managers that specialize in active management and know how to properly set expectations.


Can you give a few examples of how you match client “personalities” with the right active management approach?

Let’s take Client #1. She is extremely conservative. She is in her 50s, has significant liquid assets, but is afraid of the stock market. She is not really financially savvy about the markets, but she is well aware of the two major crashes over the last 15 years, as she lost money in each of those. When she came to us, she had all of her money in CDs.

Over time, we were able to convince her to look at a very conservative, actively managed combination of bond strategies.

Client #2 is a little older, also has significant assets, and is male. He is much more attuned to the stock market. He understands the need to see portfolio growth that will outpace inflation and provide income down the road in retirement. He reads all of the headlines about the bull market in stocks but has not participated the way he feels he should have.

So, he falls about in the middle of the risk spectrum. We have been able to construct an actively managed, well-diversified multi-strategy portfolio that emphasizes risk management while trying to achieve competitive market returns. He is pleased to be “in the market” in a controlled sense and not worrying 24/7 about the risk he is exposed to.

Client #3 is at the far end of an aggressive risk profile. He fancies himself a bit of a market expert and has just enough knowledge to be dangerous. Within our array of active strategies we can build out a more aggressive portfolio, even including some leveraged, trend-following elements.

We have had extensive conversations around market cycles, volatility, and potential drawdowns in unfavorable market conditions. He is comfortable with that and so are we.

So, bottom line, very different personalities matched up with different strategies, all under an active management umbrella.

Great examples. In a broad sense, how do you describe active management to clients?

Since our focus is on growing our firm around active management, we do have a “storyline” we share with clients and advisors we are bringing into the practice.

I like to go through a little history of the market, using simple charts. These show sideways, bull, and bear markets.

From the early 2000s through today, if you look at the S&P 500, most people are just gaining back what they lost in one or both of the most recent bear markets. If they stuck with it, they are possibly a little bit ahead now.

The point is, we don’t know what the major trend of the market is going forward, but we do know how hard and how long it takes to recover from losses in a portfolio.

“Buy and hold” simply does not work. The average annual rate of return has slipped over the years. But, what is worse is the unpredictability and severity of the two most recent market crashes.

So when I show what I call the “mountain chart,” with the peaks and valleys of the S&P, I ask clients, “Wouldn’t it be smarter to try to avoid those deep valleys? Perhaps even profiting during a bear market using inverse strategies? And to be more exposed to equities when market indicators are heading back up again?”

With active management, the timing will never claim to be perfect, but it has demonstrated that it can smooth out returns and volatility. Third-party active managers are dedicated to monitoring portfolios on a daily basis, so we, as a team, can rely on their models and not on personal emotions or predictions.

When we tell this story visually, it sends a powerful message about market cycles and how to manage a portfolio through them. As I said, this can work for more conservative and more aggressive clients through the use of proper active strategy allocations. That can be through a single manager or multiple managers.

The art—where we add value—is matching up clients with the right active management approach, consistent with their goals, which can lead to shared expectations we all are happy with and some very solid relationships.

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Disclosure: Securities and advisory services offered through Harbour Investments Inc., member FINRA/SIPC, There is no guarantee that active management will outperform a buy-and-hold approach to investing. Past performance is no guarantee of future results. Please note that individual situations can vary. Therefore, the information presented here should only be considered an opinion/example.

Photography by Sara Stathas

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