Quality Of Life‚s Revenge

Sometimes in our personal and professional lives we experience a change that leaves us a different individual. The key question is how we process that experience and whether or not we turn it to our advantage.

In last month‚s cover story, David Drucker examined how some advisors survived the bear market and why some others did not. In retrospect, it‚s not all that surprising that advisors who stressed investment performance and de-emphasized other issues suffered the most. As one advisor Drucker interviewed said, in mid-2000 he thought the market would come back quickly, just like it always had. It will come back eventually, of course, but that gentleman now is long gone from this business.

This month‚s cover story by Ray Fazzi focuses on how one advisor, who probably knew all his life that there were more important things than money, came to use that knowledge to his advantage in his practice. In the late 1990s, the biggest problem many advisors faced was grappling with the phenomenon of the bubble and market fever. Like many advisors, Roy Diliberto was wrestling with the issue of how clients would react when their diversified portfolios were only appreciating a meager 15% to 20% when the almighty Standard & Poor‚s 500 Index was up 30%.

Today, most surviving advisors can laugh at this problem and feel a measure of comfort that they avoided getting seduced by what was clearly a market trap. But at that time, Diliberto recalled meeting with his client advisory council, who studied his quarterly letters to clients and asked him why he was apologizing for 15% to 20% returns. A good question indeed, but not so obvious in the time capsule of the bubble.

But somewhere in this whole process it dawned on Diliberto that he could use his practice as an instrument to make people realize not just that money isn‚t really all that important but to help them determine what is. For most clients, money is a means to an end, not an end in itself.

For financial advisors, the challenge is a thorny one. People do care about their money, and they have a right to reasonable expectations from those with whom they entrust it. Critics argue that the whole emphasis on helping clients with quality-of-life issues is a ruse used to disguise sub-par investment performance. Wrong.

If you read Fazzi‚s profile, you can find ways in which Diliberto has endeavored to help clients realize their dreams and improve their quality of life. To some folks, helping clients decide a personal financial issue, like whether a client could take their children and grandchildren to Europe for a month at a cost of $40,000, might seem obvious. But for some advisors locked inside their little investment performance cocoon, the choice is anything but obvious.

Today, after three years of recession, terrorism and corporate accounting scandals, the fog is lifting and the horizon is clear.

Evan Simonoff, Editor-in-Chief