The Globe and Mail, Report on Business
Published January 9, 2010

A lot is written about how to pick a money manager, but it's also important to know how to be a good client. A manager-client relationship should last a long time and be rooted in confidence, empathy and stability. Both sides are working toward a common goal.

The following is a perspective on how one money manager would like to work with his clients. It is intended to be one-sided and personal. Call it my client ‘pre-nup.’

Tell me how I fit in. You're working with me because you buy into my philosophy, experience and long-term track record, but I need to know how I fit into your life. Are these assets at the core of your retirement savings, or are they a small slice of a bigger pie? Am I supposed to spice up the portfolio, or be the Rock of Gibraltar? Do you want me to be pro-active with recommendations, or just act as a sounding board and provide calm at critical points in the market?

Show me you care. You're delegating responsibility to me to select securities and implement a strategy. I won't be needy, but you have to work at the relationship too. You need to make an effort so you know how you're doing, what you own (in general terms), how much you're paying me. When we talk, I want you to have questions.

Don't avoid me when things are good. When the quarterly statement shows big returns, it's easy to put off getting together. We shouldn't. Those meetings are important in preparing us for when the numbers aren't so good. It's a time when I can reconfirm our philosophy and remind you why we're together. It gives me a chance to discuss the dogs in the portfolio without looking like an idiot. We can reassess the assignment you've given me and confirm that it's still appropriate — this is when we should make strategic changes, not at times of crisis. And most importantly, it lets me have a little fun once in a while.

No fruit cocktail please. When you're assessing how I've done, all I ask is that you make it an apples to apples comparison and pick an appropriate time frame.

Because you have more than one relationship (I'm learning to deal with it), you will naturally want to do a comparison. If your managers have the same objective and have managed your money for a reasonable amount of time, then that makes sense. If, on the other hand, you're comparing my ‘stay at home’ balanced portfolio with a fling you're having with a broker, it's not fair. He'll always look better when markets are hot, but you'll be happy I'm around when it's tougher going.

If you don't compare my performance to the appropriate measures, you'll give me credit I don't deserve and blame me for things that aren't my fault.

Time frame is also important. It is not useful to assess me based on a few quarters, or even a few years. We're in this for the long haul and our strategies are designed with that in mind. The most common mistake other investors make is getting too short term in their judgments — “I bought this fund six months ago and it's done nothing. I'm getting out.” I want us to be better than that.

Accept that I will not always be right. The level of trust between us shouldn't go up and down with every decision I make. There are lots of things that go into a trusting relationship, but being right all the time isn't one of them. A wrong decision shouldn't negate the fact that I call you back right away, am always candid, invest personally in the same things you do and don't make administrative errors (or if I do, I fix them right away).

This is the investment business. Even Warren Buffett isn't right all the time. You shouldn't question my credentials and integrity just because I'm out of sync for a while. As Coldplay says, “Just because I'm losing doesn't mean I'm lost.”

You won't always like what I'm doing. You pay for my counsel, and if I'm doing my job, you will disagree with some things I'm saying and doing. I might buy the ugliest stock on the board one day and sell a favourite of yours another. I'll make you squirm by buying when the world is coming to an end or selling when everything is rosy. It's part of the deal.

It's not you, it's me. If you want out, please say so. I'll be shattered, but dragging it out is harder on both of us. Just tell me why you're leaving and let me start rebuilding my fragile ego. I'll tell my colleagues we're going to see other people.