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I guess that's why there are all kinds of advisors for all kinds of clients. You are more than welcome to all the clients who ask for the standard deviation of their portfolio. If I spend all my time answering these kind of questions, I have no time left to take care of legitimate client needs. Standard deviation, beta, etc. are all used in constructing client-appropriate portfolios. At the same time, if my car isn't running right, I don't ask the mechanic what the compression ratio is on cylinder number six...I ask him what's wrong with the car. I work with clients that need me...not people who already know how to contruct and manage their investment portfolio.I am with Anabuhabkuss and Iceco1d on this. What is the big deal giving him the SD anyway, that is what software is for.
Excuse my passionate response.
Legitimate client needs?! The f'n SD doesn't exist for no reason, IndyOne. What I'm literally translating from your post is that you are not concerned with the quality of the car you sell the client, only that you get a car to sell them. You're right, some care, some may not. But do not think for one second that people who pop their heads in to ask a question or two about SD or Beta are wasting their, or your, time. "I work with clients that need me..." yeah, you're the only one. Haha, whatever. That's fine. What are you going to tell the guy who has evidence that your portfolio's return garnered him the same return as a portfolio with lower SD or Beta? "Bah I don't have time for this crap, people need me!"?[quote=anabuhabkuss]Excuse my passionate response.
Legitimate client needs?! The f'n SD doesn't exist for no reason, IndyOne. What I'm literally translating from your post is that you are not concerned with the quality of the car you sell the client, only that you get a car to sell them. You're right, some care, some may not. But do not think for one second that people who pop their heads in to ask a question or two about SD or Beta are wasting their, or your, time. "I work with clients that need me..." yeah, you're the only one. Haha, whatever. That's fine. What are you going to tell the guy who has evidence that your portfolio's return garnered him the same return as a portfolio with lower SD or Beta? "Bah I don't have time for this crap, people need me!"?[/quote] You couldn't be more wrong. I care a great deal about the quality of my clients' portfolios and take a considerable amount of care constructing them. Otherwise, I may not have survived this mess and the last one in 2000-2002. Part of what I'm saying is that if a client knows enough to interpret the standard deviation of his/her portfolio, what do they need you or me for? They can get execution on eTrade. On demand, I can produce detailed portfolio performance reports with index benchmarking and asset allocation charts and from my standpoint, that is enough. If a client needs an income projection by month, I can give him a report for that also. It's my job, not the client's, to worry about various metrics for monitoring the client's portfolio return and volatility. If the client can do that for himself, he's not a candidate for my services. It's that simple. There are certain groups of people that I choose not to accept as clients. If those folks are your target market, you're welcome to them. Your passion, much like that of those who jumped on your Madoff remarks, is a sign of youth. Take a few deep breaths...you'll understand what I'm talking about in a few years.Maybe the guy's just curious? I actually DO ask questions to my mechanic. I think it's in the best interest of clients to be informed. Otherwise they end up being clients of Bernie Madoff. If the guy's not challenging you on it, why not just answer his question, and ask him what prompted the question, since most clients never think to ask that?
I think we're all just assuming this guy's some kind of d1ck, that's questioning what we are doing.
"Hey, I read the other day that I should make sure I have X amount of homeowners insurance to make sure I am covered if XYZ happens? Am I covered for that?" Would this sound like a terrible question for a P&C client to ask? Or should I just ASSUME that my insurance broker has me in the PERFECT policy with the PERFECT amount of coverage? There's two side to the coin. Then again, mayeb the guy really is just a d1ck.[quote=anabuhabkuss] What are you going to tell the guy who has evidence that your portfolio’s return garnered him the same return as a portfolio with lower SD or Beta? “Bah I don’t have time for this crap, people need me!”?
[/quote]
You could say, so? Not all standard deviation, or variance, is bad when it comes to your investment returns. Remember the best performing securities must, by definition, deviate significantly from the mean - and therefore have a higher standard deviation.
Not all variance is created equal. Positive variance from the mean is great - it’s only the negative variance that you want to avoid. Standard deviation measures treat both the same, and too many inexperienced financial advisors make the same mistake, but we know better - right?
_________________________
If that doesn’t satisfy them, I’m completely with IndyOne - they are not the type of client I would waste any further time on. Neither of us will be happy. As the old saying goes, “You can lead a horse to water but you can’t make him drink.” I only work with thirsty horses.
That doesn’t mean I think I am better than every other FA out there. It only means I have the right to choose who I want to spend my time working with, just as clients have the right to choose if they wish to work with me.
B24, valid points. I don’t have a problem with curiosity and I don’t mind teaching clients. In fact, I enjoy teaching clients…just not he ones that (1) think they already know more than I do or (2) actually do know more than I do. Either way, they’re not candidates to be clients of mine. I said earlier that I’m sure Snags will get some clarification on what the client actually wanted rather than ignoring the request. If Snags then determins that the request is beyond what he wants to provide, than he’s within his rights to fire the client.
The client could very well be just curious and harmless, but my experience with these kinds of questions has been less than positive...mostly from folks who THINK they know what they are talking about, but in reality are wasting my time and theirs. ...and speaking of wasting time......I've been bad today...have to work late tonight to make up for it...[quote=snaggletooth]Here’s a question a client emailed me today that I’ve never heard before:
"What is the standard deviation of our current portfolio?"[/quote]Here is how I’ve responded to this type of question:<?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />
“That’s an interesting question. I am happy to give you the answer but I might be able to better answer the true underlying question if you could give me a better idea of where this particular question came from.”
--WM
[quote=anabuhabkuss]Excuse my passionate response.
Legitimate client needs?! The f'n SD doesn't exist for no reason, IndyOne. What I'm literally translating from your post is that you are not concerned with the quality of the car you sell the client, only that you get a car to sell them. You're right, some care, some may not. But do not think for one second that people who pop their heads in to ask a question or two about SD or Beta are wasting their, or your, time. "I work with clients that need me..." yeah, you're the only one. Haha, whatever. That's fine. What are you going to tell the guy who has evidence that your portfolio's return garnered him the same return as a portfolio with lower SD or Beta? "Bah I don't have time for this crap, people need me!"? [/quote]You're flunking out of the business and you want to argue about how to do this business? I've made a lot of dough in the last 9 years and I've never uttered the phrase "standard deviation" to any client/prospect.
[quote=indyone]Your passion, much like that of those who jumped on your Madoff remarks, is a sign of youth.[/quote]
Delusion being passed off as fact, always an impressive feat. Passion, intelligence, age and experience are not mutually exclusive. Take this fellow down here…
[quote=hank moody]You’re flunking out of the business and you want to argue about how to
do this business? I’ve made a lot of dough in the last 9 years and I’ve
never uttered the phrase “standard deviation” to any client/prospect.[/quote]
Argue about how to do wha? Where did I do that? What are you talking about? Last 9 years? What about the 20 years before that? And what does how much money you made have anything to do with the relevance of standard deviation? Are you trying to prove that any high school dropout can get into this business? Maybe your clients are dumb, I dunno. Do you have evidence I’m flunking or, if you’ll permit me to borrow words you used, are you…
Too cowardly to admit that you are dishonest? Seriously, Hank. Worst troll attempt ever.
[quote=anabuhabkuss]
[quote=indyone]Your passion, much like that of those who jumped on your Madoff remarks, is a sign of youth.[/quote]
Delusion being passed off as fact, always an impressive feat. Passion, intelligence, age and experience are not mutually exclusive. Take this fellow down here…
[quote=hank moody]You’re flunking out of the business and you want to argue about how to
do this business? I’ve made a lot of dough in the last 9 years and I’ve
never uttered the phrase “standard deviation” to any client/prospect.[/quote]
Argue about how to do wha? Where did I do that? What are you talking about? Last 9 years? What about the 20 years before that? And what does how much money you made have anything to do with the relevance of standard deviation? Are you trying to prove that any high school dropout can get into this business? Maybe your clients are dumb, I dunno. Do you have evidence I’m flunking or, if you’ll permit me to borrow words you used, are you…
Too cowardly to admit that you are dishonest? Seriously, Hank. Worst troll attempt ever.
[/quote]
I might’ve gotten you confused with another idiot.
have your asst take 5 min to do a morningstar port X-RAY, give him the answer, and then use it as a teaching moment without too much lingo. no big deal.
Agree. Not giving the answer makes it look like there's something to hide, it's probably easier to just spit the number out than try to defend why you say it's not applicable. Wonder why people are losing faith in the advisor model just look at the thread here, the majority of FAs here that refuse to tell a client their SD, instead they'd rather fire the client?!have your asst take 5 min to do a morningstar port X-RAY, give him the answer, and then use it as a teaching moment without too much lingo. no big deal.
I don't understand why all the animosity toward the client. This last year's market has made everyone an expert on what "Wall Street" has done wrong. He may have very well heard someone on CNBC, MSNBC, or Bloomberg say, "You should have a portfolio mix with a SD of no more than x."
Do like newnew recommended. Do an instant X-Ray and get the info the client was asking for. But make sure you do a follow-up on why he was asking that question, "Mr. Client that is not a question I hear very often, what made you think of it?" It will more than likely tell you how to proceed with your client/broker relationship.
And yes, I have had someone ask me that question. But I found it to be a typical question from this particular client, he attended the Wharton School of Business.[quote=exEJIR]
I don't understand why all the animosity toward the client. This last year's market has made everyone an expert on what "Wall Street" has done wrong. He may have very well heard someone on CNBC, MSNBC, or Bloomberg say, "You should have a portfolio mix with a SD of no more than x."
Do like newnew recommended. Do an instant X-Ray and get the info the client was asking for. But make sure you do a follow-up on why he was asking that question, "Mr. Client that is not a question I hear very often, what made you think of it?" It will more than likely tell you how to proceed with your client/broker relationship.
And yes, I have had someone ask me that question. But I found it to be a typical question from this particular client, he attended the Wharton School of Business. [/quote] agree. The funny thing is I don't even think the question is sophisticated, I think a lot of FAs are going to start seeing more of these questions in 2009 and it's not just the Wharton guys that will be asking. My question is, are people here going to answer the simple request or fire the client for asking a question? I think it's humorous the sense of entitlement here, like it or not when someone wants their SD it's something you should be able to easily provide and there's no need to put up a fight about it, like it or not it's part of the FA's job to answer these questions. If I were a client and my FA put up a fuss about giving me that info I would think they have something to hide or that they are not competent. For a senior broker, or someone that has gone indy, it's one thing to act like a d-bag in response to a technical question but for the newcommers trying to build a book I think it's terrible advice to encourage a condescending response to a question about SD. Start answering a question with a question in a down market and you're destined to lose accounts, when people ask a question you should give them an answer.<?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />
If a client asks for a number like SD or Beta of their portfolio you should give it to them. You may have to put it into context for them but that is one of the things they pay us for. As I see it is my job to be on top of my client’s portfolio and I should have those numbers at my finger tips. I should also be able to explain to my clients the strength and weakness lots of different portfolio evaluation techniques. If you do not like SD as a technique fine but that does not mean you should not provide it you the client who ask for it, and more important put it in to context for them.
<span =“Apple-style-span” style=“border-collapse: separate; color: rgb0, 0, 0; font-family: -webkit-monospace; font-size: 13px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: normal; orphans: 2; text-indent: 0px; text-trans: none; white-space: pre-wrap; widows: 2; word-spacing: 0px;”>Those who seem to believe you are obligated to directly answer a question about standard deviation - or any such question - are missing the point.
If a client emails you out of the blue asking such a question (as was the case in which we are discussing), almost certainly the real issue has nothing to do with standard deviation, so simply answering the question is an exercise in futility. You could give them just about any answer and it would likely do nothing to make them feel more comfortable.
That’s because the real issue is that this client suddenly seems to have lost his trust in you. Asking a question about standard deviation is nothing more than a red flag alerting you to the existence of the real issue.
Given this, my experience has shown that simply answering the question will do nothing to address the trust issue. And I’ve also learned from painful experience that if you lose their trust, you’ve lost them - sooner or later. I prefer to press the issue directly and immediately, rather than tip-toe around it or let it fester.
This includes being willing to initiate a change (i.e. firing them) if and when it becomes apparent to me that they no longer seem inclined to trust me and take my counsel. Sometimes the issue can be resolved. Sometimes it can’t. But either way, it should not remain in limbo.
That is why I say the issue has nothing to do with standard deviation. And it certainly has nothing to do with “animosity toward the client” as exEJIR presumes. It is about being in control of what type of client you choose to work with, and being willing to actually be the advisor in that working relationship.
Morph
P.S. Smokescreen, I’m choosing to ignore your silly and uninformed comments about “people losing faith in the advisor model” which tells me you’re once again simply projecting from your bitter and unsuccessful experience in the industry.
What I’m still puzzled about is why you feel compelled to continue offering your opinions here at all. Maybe if you were actually in the business or had ever had any meaningful first hand experience managing clients as an FA (rather than simply functioning as a sales assistant), your opinions about managing clients or what you think might be “part of an FAs job” might be more relevant.
I left by choice, if I so choose to go back to it later in life I may do so. I was in the industry long enough to understand the role, sure "junior broker" and "sales assistant" might be interchangeable to some degree in your mind but my role was much closer to that of an FA than you probably think, but feel free to assume anything because it really doesn't matter anyways. Until my licenses are expired I feel pretty comfortable weighing in my opinion, in fact plenty of people here agree with me. I think it's funny you are trying to attack me based on the fact I walked away to essentially turn my hobby into a job, almost anyone in my situation would have done the same thing in a heartbeat and by no means should that make my experiences, observations, and conclusions any less valid. If you have a problem with my opinion on the topic that's fine but to say I am off base simply because I took my career in a different direction that's weak.<SPAN style=“WORD-SPACING: 0px; FONT: 13px -webkit-monospace; TEXT-INDENT: 0px; LETTER-SPACING: normal; BORDER-COLLAPSE: separate; orphans: 2; text-trans: none; widows: 2” =“Apple-style-span”>
P.S. Smokescreen, I’m choosing to ignore your silly and uninformed comments about “people losing faith in the advisor model” which tells me you’re once again simply projecting from your bitter and unsuccessful experience in the industry.
What I’m still puzzled about is why you feel compelled to continue offering your opinions here at all. Maybe if you were actually in the business or had ever had any meaningful first hand experience managing clients as an FA (rather than simply functioning as a sales assistant), your opinions about managing clients or what you think might be “part of an FAs job” might be more relevant.
I think Morphius is right.
There a certain advisors who will take any client(out of need, job fear, can't say no, just pushing another product and forget them, etc...) and they will answer this question directly, because they don't know their client very well.. Morphius is right because when someone asks a question that is out of his realm, he either heard it on tv(probably CNBC, worst station ever) or is losing faith/trust in you to do your job. Crappy advisors have commoditized the market with people just wanting to sell a product to as many people as they can(kind of why I left Jones(not suggesting everyone at jones does it, but my region did)) with no regard for the client. When I take on a client I point out somethings up front. I. I am not a peddler. I am giving you my advice; if you choose not to take my advice. That’s fine it’s your prerogative, but you don't need me or my firm, go open an account at Ameritrade. II. I am the expert I will listen to what you say, however I will make the investment decisions because I am the expert. I have this quote from a mentor of mine:“If you open an account with me only 3 people are going to make a decision, you me or us.
If you are going to make the decisions, you don’t need me or an account with my firm, you can do this on your own.
If I make the decisions that is the way I would like it, I’ll make those decisions and you just follow my advice.
If We’re going to make decisions together, then here is the deal, I will make the suggestions, you retain veto power. But you can only veto for non-investment reasons: If I recommend a fund and you don’t like the color of the brochure, Fine, If I suggest you buy a stock and your brother-in-law works for that company and he is a jerk , Fine. But please don’t argue investments with me”
Sorry that got long, at home sick…
Also for those of you who say, just calculate it, there is a disconnect there because you cannot accurately calculate a SD for all portfolios. Sure for mutual funds,etfs,stocks no problem plug it in Morningstar(is there a more jaded company) and get a read out, but for everything else... good luck