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Why Annual Reviews Matter

An astute financial advisor once told me, “Your client’s financial life needs just as much attention as their personal life. They must find the time to check it out.” Your financial advisor knows how to ‘check it out,’ while providing comprehensive solutions to your individual needs and concerns vital to your overall financial success.

Summing up the year’s progress, performance, life changes and the like, and anything that affects planning, allocation and strategy, are all essential components of our being at the top of our games in learning, understanding and executing on your behalf.  

Does it matter when you have your annual review?

You might be surprised to learn that some financial advisory firms do not require their advisors to conduct annual review meetings.

My partner, Bill Mancino, and I maintain a central figure status in our clients’ lives. We simply put it out there that we want, at a minimum, an annual review – but prefer them to be semi-annual, face-to-face meetings. We have found that holding these meetings semi-annually is not only preferred, but also productive and well received.

In fact, advisors nationwide are moving away from the traditional “year-end” mentality and moving toward the “ongoing” mentality. After all, they review asset allocations, risk tolerances, things that worked and things that didn’t, at various points throughout the year anyway – ­not quarterly anymore – and feel this is a better solution.

With 600 households, I can honestly say that 95 percent of my clients don’t mind coming in twice a year. And I am very thankful for that! 

What’s changed since last year?

Annual reviews that are scheduled after the first of the year are sometimes treated more like an introduction to a new year instead of a finale to a previous one.

Successful firms like ours grow annual review meeting agendas beyond investment performance; policies and market outlooks to discover what present and future needs are and will be. We want to make a difference in our clients’ lives, but in order to do that we need to see them and have frank conversations with them more than just once a year. If there are any unmet needs or areas of dissatisfaction, we need to know about them in order to act accordingly and correct them.

An important unspoken benefit of this meeting is that clients can vent if they want to. If something has bothered them, made them unhappy, this is the appropriate time and venue.

In fact, how we think about this is what we call “RECON.”

R: remember. Why did we get together in the first place?

E: experience. What’s it been like working with us? Are we in touch enough, etc.?

C: changes. Anything we need to change, either on the portfolio or relationship side?

O: opportunities. What’s in the marketplace that looks interesting and suitable?

N: next steps. What we need to take care of and then we’ll plan to meet again soon.

Communication opens all doors

Obviously, we want to be your most trusted primary advisor. And it’s likely you have only one advisor, your primary advisor, whom you work with exclusively because they know you and your entire financial picture. But remember, a financial advisor can only do a thorough review of your portfolio from the assets that he or she knows about. If you have a 401(k) or 403(b) at work or at a previous employer, we need know about it so that we can incorporate your current allocations into the review mix.

Which brings me to why it’s not surprising that sometimes having more than one advisor can be problematic. As CNBC reported recently, in the absence of a coherent strategy, multiple advisors could put you into the same investment multiple times, and tax-related decisions can suffer when multiple advisors are involved.

"You may wind up overweight or underweight in certain sectors, not intentionally, but because advisors don't know what the others are doing," said Ben Greenfeld at Waldron Private Wealth. "You may run undue risks which can ultimately affect your long-term returns.”

Greenfeld says if advisor A has $100,000 taxable gains for the year, but manager B has $100,000 of unrealized losses, if they can coordinate those, you'll have a much lower tax bill. It always boils down to communication to make things work.

Yes, it’s definitely worth the time and effort

Both Bill and I share the idea that we can’t guarantee that the future is going to be what we think it’s going to be, so we need to make sure we’re getting our clients from point A to point B, while checking the map along the way. The review does that, even if it is a phone or paper review.

Annual reviews take a lot of time to prepare and 60 minutes to conduct. Anything that our clients need us to know, or want to tell us about, is first on the agenda. After that, we’ll walk them through what the market has been doing since we last talked. We’ll then get into specifics on their actual accounts, along with any changes or updates we feel we should make to their allocations. We get down to business but also have fun doing it.

And in the final analysis …

Beliefs come from behavior. Clients who come to meetings and reviews, and continually talk about their goals and objectives have this innate belief that they’re going to get where they want to go. It’s always interesting to me that other people don’t view money the same way as the clients we meet with every six months.

The best advisors understand that long-term returns are the only ones that matter, but their clients will never see those returns if they can’t create (and implement) a plan that ensures they can make it through the time it takes to get there. As a Certified Financial Planner professional, I wholeheartedly believe that creating and implementing a plan is the only way to take you on the journey to where you want to go.

What gets me out of bed in the morning is the face-to-face interactions and problem solving. Sure, we start out with a plan and give investment advice, but I have also seen that first plan get scrambled at some point, so it’s never how we think it’s going to be or ever perfect. That semi-annual review, in our world, is our attempt to make sure we’re in-between the lines at all times. Which, to me, is why annual reviews matter.

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

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Hefren-Tillotson Inc. is a leading diversified financial services firm providing investment and retirement plan management and comprehensive, financial planning through MASTERPLAN® for individuals and businesses. The firm’s wealth management services are administered by Certified Financial Planner (CFP) professionals, Chartered Financial Analyst (CFA) Charter holders, attorneys, Chartered Life Underwriters, and CPA/PFS’s. Hefren-Tillotson offers corporate services including 401(k) retirement planning, executive financial counseling, fiduciary reviews and workplace financial planning seminars. Founded in 1948, the firm is headquartered in Pittsburgh and has offices located in Pittsburgh, Butler, Greensburg, North Hills, and South Hills. MEMBER SIPC.