Having a communication plan can mean fewer phone calls during volatile markets and more referrals overall, says Clay Gillespie, vice president of Vancouver-based Rogers Group Financial Ltd.

“My strategy,” he says, “is to be prepared for events before they even happen.”

Calls from frantic clients during market downturns can be frustrating for both advisors and clients. But in a practice that is more relationship-based than transaction-based, that shouldn’t happen. An effective, ongoing communication plan can ensure clients are educated and prepared for negative market changes before they occur.

“Every time you meet with a client, even if the markets are doing well, you should be talking to them about long-term goals and various outcomes,” says Allison Merrow, a partner and consultant with Advisor Pathways Inc. in Toronto. “Preparing clients is the most critical part of a communication plan. You are reinforcing the fact that markets can come down but that the client is still on target because the financial plan was prepared with occasional downturns in mind.”

Setting up a communication plan takes some time and planning. First, look at what you want to communicate and how you will communicate that message to clients. You then need to establish what you can realistically accomplish.

To do this, consider categorizing your clients, defining the type of communication that is appropriate for each client category. Some clients may prefer e-mails, for example, while others may want a phone call or personal letter.

Merrow, who helps advisors set up client service strategies, believes that every advisor should, at minimum, have an annual review session with each client with proactive communication in between.

Of course, it depends on the size of your client base and what the issue is. “During 9/11, I contacted every single one of my clients,” says Merrow, who was a financial advisor at the time. “I felt it was a situation that needed that personal communication, and phoning them was the method I felt was most appropriate.”

Once you have established what strategy you are going to use, you have to determine whether you can support that plan. “There is nothing worse,” she adds, “than overpromising and then underdelivering to clients.”

And, finally, you have to put your communication plan into action. Consider a contact-management system or using a call-rotation system.

Terry Richardson established his communication plan 20 years ago. The advisor and director of financial services with ScotiaMcLeod Inc.in Saint John, N.B., uses clients’ birthday reminders as opportunities to set up annual reviews. On days during which there is a significant amount of market movement, Richardson finds that he gets very few, if any, phone calls from clients.

“It does take time to build that plan and confidence level,” says Richardson, who has been in the financial services advisory business for 30 years. “It doesn’t happen overnight. But as advisors grow in the business, we also become more seasoned and tend to become more aware of the clients and what their individual needs are.”

Richardson also sends out an annual questionnaire that not only helps him update his files but also allows him to learn about clients’ concerns — both financial and non-financial.

“We like to know our clients’ interests,” he says. “It adds to building that relationship if we can provide them with material on their personal interests, such as wine, gardening or travel. It is the relationship that really gets you through both the good times and the bad times.”

Today, there are many other methods of communication, such as daily e-newsletters, blogs, personal Web sites and Web-based seminars or “webinars.” The technology you choose depends on you and your clients.

“We do see a lot of advisors setting up Web sites, on which they can post a communication piece to their clients,” Merrow says. “They send out an e-mail telling clients to visit the site.”

Some advisors prefer the online technology because it is paperless, instantaneous and direct. But, however, you have to be sure to keep track of which clients are tech-savvy and which would prefer a more traditional approach, Merrow advises. Gillespie, for example, knows which clients prefer e-mail and which a paper letter.

Still, Gillespie has reverted to “snail mail” letters when communicating with his clients. “I am using e-mail communication less and less because people just aren’t reading their e-mails anymore,” he says. “They get caught in clients’ spam filters and go to junk mail. If I mail them a letter, then they will actually open it because they know it’s from me. It is much more effective than what I was getting with e-mail.”

@page_break@Establishing a communication method right from the beginning is the best way to set standards, he says. Clients will know how many times you will be contacting them and what to expect over time.

“I always say, ‘Over the next 10 years, you are going to love me twice, hate me twice and be indifferent with me six times’,” Gillespie says. “Two times out of 10 the market is going to go up dramatically, two times out of 10 it will go down dramatically and six times out of 10 you are going to just shrug your shoulders.”

Market downturns are also proving to be a high point in business referrals for advisors who have communication plans in place. That is because a relaxed client in a market downturn can be a powerful endorsement for that client’s advisor. “When markets are down, I get significantly more referrals than when markets are going up,” says Gillespie. “Clients will be talking with their friends, who are shocked about the markets. The client tells the friend that they were prepared from the beginning.”

Richardson’s experience is similar. Over the past four months, he has seen $13 million-$14 million worth of business referred to him by clients. “Clients hate surprises,” he says. “So, if they know it’s going to happen and it happens, then it isn’t as big a deal.”

Certain events do call for contact outside your plan, says Gillespie. In October, he felt it was necessary to address the issue of the strong Canadian dollar and its weakening U.S. counterpart. In January, he addressed the market correction.

“I reminded clients to remember the strategy we had set up and that it was built for this to happen,” he says. “This strategy works only if you have gone through your reviews and reinforced the message again and again.”

If you do not have a communication plan in place, clients start worrying about their portfolios when they hear about market corrections from friends and in the news. That’s when you could experience cycles of calls — some advisors receive hundreds of calls — from nervous clients.

While it can be a challenge, depending on the size of your client base, communicating consistently so that clients know what to expect should reduce those calls considerably. Advisors with communication plans — and, therefore, educated, confident clients — should receive only 10 to 20 calls in a market downturn, says Julie Littlechild, president of Toronto-based Advisor Impact Inc.

But, Littlechild warns, this does not mean you should stop calling clients. Research shows that the clients who are the most engaged in the relationship with their advisors — and who are the most profitable — are those who also demand and receive a higher level of contact.

“If you can move clients to an even deeper level of engagement in the relationship,” she says, “it’s often linked to that personal level of contact — and that contributes to the bottom line.” IE