THREE THINGS ADVISERS, AND INVESTORS, CAN LEARN FROM POLITICIANS BEHAVING BADLY.

Advisers and their clients can avoid missteps

The federal election campaign is proving particularly costly to those politicians who forget the importance of listening to their constituents when it comes to gauging their wants and needs, including their desire for an actual election itself.

Investment advisers have the same responsibility, or duty of care, to our clients, and yet many still deploy the archaic approach of trying to sell things that could completely miss the mark.

People see through these tactics from both politicians and advisers alike. Here, then, are three things advisers — and, by extension, investors — can learn from politicians behaving badly and, instead, earn a client’s vote of confidence.

Financial planning

As a first step, politicians need to stop telling us that everything will normalize with time and, instead, start asking Main Street how the cost-of-living crisis is specifically impacting them, and then devise a plan on what can be done about it.

Similarly, advisers need to start asking tough questions to truly try to get a good understanding of their clients’ needs. Advisers simply can’t tout that everything will end up OK if clients just hold over the long term, and then do nothing with their portfolio while it is getting whacked by a correction.

This head-in-the-sand approach could particularly do a lot of harm to retirees in an environment of ultra-low interest rates when inflation rates are spiking higher at the same time. It isn’t surprising that when retirees are told that monetary policy isn’t important, it can come across as unsettling to this large segment of the population. The same can be said about young people trying to establish roots, but unable to do so, thanks to rocketing housing prices that are completely out of reach.

An adviser can earn a client’s trust by flushing out their financial goals and objectives, identifying areas of weakness or problems that need to be immediately addressed, and then coming up with a specific plan on how to achieve those goals.

The more specific the plan, the better, and it should have concrete actionable steps, including portfolio design and construction, and how to partner and work with accounting, estate and tax specialists.

Goals-based benchmarking

Some recent policy announcements in the election appear to be winging it without much thought given to the ultimate goal or objective. This is no different than an adviser trying to sell a client something, such as an in-house, high-fee investment product, that appears to be in their best interest and not yours.

Even worse is if an adviser responds to a question about their services by criticizing what their competition does or doesn’t do, instead of simply answering the question about their own offerings.

In order to avoid this, it helps to use the aforementioned financial plan to stay on top of a client’s goals and objectives, keeping track as to how they are being implemented and achieved while allowing for changes to be implemented as life circumstances change. Transparency is key here.

Playing the long game

Politicians and advisers alike need to stop recommending something that they think will have immediate appeal, but could end up making the situation worse in the long term.

For example, Justin Trudeau recently announced a three-per-cent surtax on bank profits, clearly thinking it will appeal to voters upset with our high banking fees. However, in reality, due to the Big Six oligopoly, it is very likely that the cost of this tax will simply be passed along to consumers, making the cost-of-living crisis that much worse.

Instead, why not look at introducing policies that will help break up the stranglehold the banks have on the Canadian market by allowing more competition?

Unfortunately, many advisers fall into the same trap of recommending products/ solutions based on their sex appeal, such as those offering strong near-term performance or a high yield.

Instead, stop selling and start looking at the individual components of a portfolio that when put together will help achieve a longer-term goal while mitigating risks as much as possible. This may mean being a contrarian and adding certain investments that are currently out of favour.

The best way of earning trust is by being authentic, and that authenticity is built upon a reputation for putting the client’s interest ahead of yours, even if it costs you some business. This may be a rarity in politics, but it doesn’t have to be in investing.

Martin Pelletier, CFA, is a

portfolio manager at Wellington-altus Private Counsel Inc. (formerly Trivest

Wealth Counsel Ltd.), a private client and institutional investment firm specializing in discretionary risk-managed portfolios, investment audit/

oversight and advanced tax and estate planning.