Every investor would love to know the future, and there is no shortage of “experts” willing to provide a forecast. Ask and you shall receive. If the forecast turns out to be wrong, the expert will list all the unanticipated events causing them to be wrong. But as advisors have heard me say for years, isn’t that the definition of the future, “unanticipated events.”
There is lots of uncertainty at the moment–will Europeans be able to rescue Greece, are we going to slide into a double dip recession, is the U.S. headed down the same path? Nobody knows the answers to these questions, but advisor’s clients still want to know… and they will ask.
Advisors certainly need to be able to talk about what is happening in the world today and they need to be talking to their clients, but please be careful when discussing these issues. Without realizing it, advisors can appear to be making a forecast when asked for their opinion about future events. Advisors want their clients to be happy, and clients will grab on to a single word, or take things out of context, and create a view of the future in their mind. And then if that view of the future does not unfold, they will hold the advisor accountable.
But an advisors unwillingness to make a forecast, set against the competitions willingness to make a forecast, may make it difficult working with new clients.
Yesterday I met with a CPA/Advisor who had the opportunity recently to listen to a sales pitch being made to one of his clients by one of the large investment banks. Forecasts were being made, and, as you might expect, most of the recommendations were focused on investments that have performed well over the recent past. (They are also well aware of how investors make decisions.) A forecast that seems credible is a powerful sales tool, but it really is of no value to you and your clients.
One response to “No Forecast Allowed”
What Dan describes we see all over the world. The “master of the universe” sell strategies and products based on past performance – they promise advisor things they
can´t control. The insider scandals on Wall Street proof and show how they work – they don´t have skills which we don´t have and for which a investor has to pay exorbitant
fees. At the end the advisor who believed in this show has the trouble with his clients when he has to tell him that the investment didn´t work and he lost money – or can you
remember that a “master of the universe” helped you to clean up the mess. I worked in the “master of the universe” industry and believe me – in this world client satisfaction
is not the aim.