Benchmarking Performance Evaluation

During a recent performance evaluation meeting, a private wealth manager is reviewing the performance of a client's portfolio relative to a benchmark portfolio consisting of a 70% allocation to a diversified equity index and a 30% allocation to a bond index. Over the past year, the client's portfolio achieved a return of 12%, while the benchmark returned 10%. The wealth manager also notes that the portfolio's standard deviation of returns, a measure of volatility, was 15%, compared to the benchmark's standard deviation of 12%.

The wealth manager must decide how to adjust the client's portfolio allocation strategy based on this performance. Specifically, he is considering whether to retain the current benchmarks, modify them, or adopt a different method entirely to assess the relative investment performance moving forward.

Given this scenario, what is the most appropriate course of action for the wealth manager regarding the benchmarking process in the performance evaluation?