In touch when it matters

General Guidelines

1. No News Is Not Good News. Some advisors believe that if you don’t hear from clients, everything is fine. Although that might be true in some cases, the majority of anxious clients won’t pick up the phone and call you. Rather, they’ll sit and stew, and be vulnerable to the next advisor who contacts them and offers to talk.

A critical quality that drives client satisfaction with their advisors is that clients have the confidence that they’ll hear from their advisor when there are important developments. Your clients want to be confident that you’ll be proactive rather than waiting for them to call.

2. Don’t Wait For Definitive Answers. I’ve had advisors tell me: “Things are changing too fast to be able to say anything concrete,” or “I’ll call when things are clearer.”

Guess what? By the time things are clear, it will be too late. Your clients need to hear from you in the heat of the problems, not after the fact.

Clients generally understand that things are changing quickly, and aren’t looking for cut-and-dried solutions. What’s critical is that they know you’re on top of things and can be relied upon to keep them up to date. Most clients will be happy if you say: “There’s a great deal of uncertainty right now, but here are three things we do know…” Then, finish by promising to provide updates as new information becomes available.

3. Be Specific Rather Than General. During volatile times such as these, the more concrete and specific you are, the better. So, for example, offer: “Based on earnings, the [index] is cheaper today than at the low in March 2009.” That is much more persuasive than saying: “Stocks today look exceptionally cheap.”

And avoid anything that could be interpreted as a sales pitch. That means staying away from charts with fund-company logos, as these could be seen as biased and self-interested. And be careful about timeworn charts such as “the impact of missing the 20 best days” as a reason to stay invested. Although your clients may not say it, the mental response by many to this chart will be: “And what would have happened if I’d missed the 20 worst days?”

4. Provide A Balanced Perspective. In periods of this kind of market volatility, your clients are looking for objective guidance and a balanced point of view.

To provide balance, consider addressing both sides of the argument. If you think market fears are overblown, start by acknowledging the genuine causes for worry before going into the evidence that supports your case. By first acknowledging the real issues that have fuelled concerns, you build your credibility when pointing out countervailing arguments.

 

Crafting Your Message

Don’t media-bash. Many advisors grind their teeth when they see headlines about stocks that “plummet” or “plunge” after a 4% decline. These words summon up images of an elevator in free fall after its cable has snapped, not markets experiencing a painful but not abnormal drop. That said, criticizing the media will only make you appear defensive. Keep your thoughts on the media to yourself and move on to other topics.

Some clients may be worried that the U.S. economy is on the brink of collapse and it will drag Canadian portfolios down  with it.

With that in mind, below are five specific points you might consider including in your message to your clients today:

1. ”This Is Not 2008 All Over Again … And The U.S. Is Not Greece.” Some recent commentary has suggested that we’re seeing a reprise of the 2008 global financial crisis, or that the U.S. debt rating will follow that of Greece.

Without dismissing the real debt and unemployment challenges faced by the U.S., today’s issues are nothing like those of 2008, when it truly did appear as if the world could fall into a 1930s-style depression. As an example, in early 2009, Harvard University economist Robert Barro wrote in a Wall Street Journal column that historical precedent indicates a 20% chance of another depression. No mainstream forecaster is making that kind of apocalyptic prediction today.

Along the same lines, remind your clients that while dealing with deficits and funding social security and Medicare will require some tough decisions, the good news is that the U.S. does have options that many other countries lack.

If your clients are anxious about the U.S.’s future, point out that the country’s top universities and entrepreneurial spirit are still the envy of the world. Cite the concentration of global technological innovation in Silicon Valley and note that U.S. universities remain the destination of choice for the best and brightest from around the world.

2. ”Here Are Perspectives From Respected Experts.” In my September column, I wrote about an advisor who, in 2008, started sending existing and prospective clients a weekly link to an article or video, which helped existing clients and attracted new ones.

You can bolster your case with articles from credible sources featuring recognized authorities. A classic example is Warren Buffett’s October 2008 article in the New York Times, “Buy American, I am” (www.nytimes.com/2008/10/17/opinion/17buffett.html). Publications such as the Globe and Mail (www.theglobeandmail.com), Forbes (www.forbes.com), Canadian Business (www.canadianbusiness.com), the Economist (www.economist.com) and the Financial Times (www.ft.com) can all be sources of compelling articles that you can email your clients. (Note that some publications allow only limited access unless clients are online subscribers.)

3. ”And Now You Can Watch These Experts As Well As Read About Them.” While written commentaries from experts can have a positive result, including links to video interviews in your client communications can be even more powerful. There’s no substitute for the emotional impact of seeing and hearing a respected expert explain his or her perspective.

Finding the right video to send can be worth the effort. If you monitor sources such as CNBC (www.cnbc.com) and Bloomberg (www.bloomberg.com), you’ll often find interviews you can use. The weekly Consuelo Mack interview on PBS (readily accessible online at http://wealthtrack.com) also provides great content.

4. ”Let’s Re-Evaluate Your Portfolio.” For clients who are anxious, this is a natural time to sit down and revisit their portfolios. If the kinds of ups and downs in markets we’ve seen are too much to live with, the only solution is to reduce the exposure to stocks. Given today’s rates on bonds, this shift will typically require reducing expectations on long-term returns and will mean revisiting core assumptions in financial plans. These kinds of discussions aren’t easy, but they are essential in ensuring clients have portfolios they can live with.

5. ”Let’s Stick To Core Principles.” Past downturns have taught us at least three lessons. First, it’s important to help clients understand how much risk they can live with and design portfolios that operate within those risk parameters. One way to reduce stress for retirees is to have an ample cash cushion at all times, so that living needs can be funded without having to sell assets at depressed prices.

Second, once you have the right asset mix and appropriate diversification, portfolios must be monitored to ensure that this asset mix is maintained. That means regular rebalancing back to the target asset mix and ensuring that no single sector assumes too much weight.

Finally, help clients understand the cost of acting rashly. Good decisions are seldom made when emotions are at their peak. If your clients want to make a drastic change in response to something they read or see, suggest taking 24 hours before acting on that impulse.

No single approach will work for every advisor. As you consider your client communications in the next while, think about adapting some of these tips to let your clients know that you are on top of things and are there for them. Knowing you are being proactive and monitoring their portfolios is one of the few things that can reduce your clients’ anxiety.  IE

 

Dan Richards is CEO of Clientinsights (www.clientinsights.ca) in Toronto. For other columns by this marketing expert,
visit www.investmentexecutive.com.