What Advisors Do When Clients Get Jittery

"When the economy suffers is not the time the investor should be panicked. As long as nothings changed from their financial perspective, theres a very good chance they should stay where they are," he says.

Investors who become upset with their advisors usually do so "because the advisor makes money whether the investor makes money or not," Bonevento says. "The wrap account came from investors being tired of the investor not doing as well as the advisor.

"In a wrap account, the amount of money the advisor gets up front is very low, so it behooves the advisor to give good advice," he says. "If the relationship isnt cultivated, it ends."

Despite the apparent pitfalls of a trying economy, Keitha Kinne, director of investment management services for Prudential Investments, Newark, N.J., says there are many "good reasons why a mutual fund wrap program is a good vehicle for the advisor to work with.

"We find a very strong connection between client satisfaction level, both with the firm and advisor, and the degree to which that advisor uses the investment-consulting program this is based on," she says.

Mutual fund wrap programs "are about putting together an overall investment plan that includes being diversified," Kinne says. "Advisors who have provided their clients a diverse book of business are happy today, not like people who sold large-cap tech funds a year ago."

The process built into the mutual fund wrap program is in itself a safeguard against misinterpreting a clients needs and risk tolerance level, Kinne says.

"Because these programs follow that process, it allows the representative to have a systematic way to sit with clients, to understand what the clients risk tolerance is compared to other investors and be able to monitor plans in an efficient way as well," she says. "So its a good way for the representative to bring solutions to her client and a good and efficient way to build your practice."

Involving the client in the creation of the wrap is a way to maintain her confidence level when the investments chosen begin to drop in value, Kinne says.

"Theres always a process the advisor needs to be going through with the client, and it begins before" funds lose value, she says. "We see a definite difference in the happiness of clients when theyre included in selection of funds. The advisor should not succumb to a client asking her to pick the investments."

A scenario in which Kinne would support a change in the program is if a fund manager picked for a certain style "is performing outside of the context.

"The client should understand the history of a manager upfront and that hours are dedicated to monitoring performance of the fund," Kinne says.

Reproduced from National Underwriter Life & Health/Financial Services Edition, September 24, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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