Taking care of business with spring cleaning

As Bachman-Turner Overdrive once sang, advisors are “taking care of business.” With April well underway and tax season coming to a close, some advisors might be considering doing some spring cleaning around the office.

That can mean a lot of things, from reviewing and shifting portfolio allocations to revamping recruitment and marketing strategies, or simply just catching up on their work.

Some advisors might still be focusing on the old adage, “Sell in May and go away.” But Andrew Evans, CEO of Rossby Financial, said his focus is looking at the books of business, and whether clients have any accounts that need to be closed out or if they have too many accounts.

“From a general paperwork standpoint, [we’re asking], are our files in the places where they need to be? Are they easily accessible and do we have the proper naming convention so that we can find things properly?" he said. "Going through that process is really how we view spring cleaning.”

Joanne Burke, owner of Birch Street Financial Advisors, says she does a midyear portfolio review in investment review meetings with clients.

“We made some tweaks in anticipation of what was coming ahead,” she said. “We reduced our emerging markets holding and opened up and expanded the large-cap growth, because the earnings per share looked good and the valuations supported by the falling rates. But we think small-cap stocks are still improving as the recession risk fades.”

Burke noted that her team is always trying to figure out the best opportunity for yield. “If rates do come down, what are the options for us to maintain as high a cash yield as possible?”

Evans says what really dictates changes for him is not the timing in the markets but rather notable client events. One example he cited is a client who sold their business and retired.

“They have this lump of cash that they've been saving for a year. Well, the allocation is probably going to change because we need that to be income-generating, not necessarily growth-generating," he said. "So how do we fundamentally change that allocation? That does tend to happen toward the spring when people retire.”

Eric Amzalag, founder and CEO of Peak Financial Planning, says the winter months are focused on creating income plans for clients who take income from their investments. That leads to a high volume of work, then things tend to subside in March and April.

“Spring cleaning, for us, looks a lot like following up on any outstanding tasks that clients were supposed to take action on but may not have attended to,” he says. “We will do some portfolio rebalancing, specifically, taking profits in clients' accounts where they've had positions that have grown to be too large a proportion of their actual investment account.

“That is only coincidence,” Amzalag added. “It's not necessarily something we would that we would do every year as a spring-cleaning activity, because in some years, the market may not perform the way it has leading up to now, and therefore, that activity is not necessary.”

Eric Roberge, founder and CEO of Beyond Your Hammock, won’t be focusing on investments, but rather office administration and the firm’s planning processes. It’s also the end of his firm's client search season, where they have a lot of client meetings over a period of time.

“That allows us to really understand what's working and what's not working, and what can be improved inside of our process for financial planning,” he says.

“We aren't adjusting portfolios because we are not active managers or market timers,” Roberge added. “As much as we keep our hand on the pulse of the economy and market conditions, short-term fluctuations and speculation about the coming months rarely impact the action we will take in portfolios. That's a losing battle in the long term.”

Ultimately, for those who tend to focus on investments this time of year, it depends on the investments held within client accounts, Amzalag says. They don’t change portfolio allocations simply because of how the S&P 500 performs on a monthly basis. One thing Peak Financial has been doing on behalf of its clients, though, is adding more bond positions as interest rates remain high.

“Stocks have gone up a lot and so many of our clients will be overweight,” he says. “Their allocations will be stock heavy because the values of those may have gone up 20 or 30 percent, if they were in line with the S&P 500. So you can rebalance out of stocks and into some bonds, where you're selling more expensive stocks and taking profits, and buying cheaper bonds.”

Regardless of what’s on the spring-cleaning checklist, Roberge suggests that advisors should be focusing on cleaning up on a quarterly basis rather than just once a year.

 “I think if you're really trying to make the most of your business and have the most impact on your clients, you have to be looking at this stuff on an ongoing basis and not just waiting for once a year," he said.