Robin Giles, third-generation owner of a sheep and cattle ranch in the semi-arid Texas Hill Country, believes that “lots of green grass and lots of water have broken more cattlemen than anything.”1 In other words, when conditions are favorable, it is easy to let your guard down. “A drought,” Giles said, “is where you get your house in order.”2
For many independent advisors, the long bull market of 2009–2020 was a period of mostly “green grass and lots of water.” Though the market experienced occasional volatility, the major trend was upward, and it was relatively easy to maintain investor confidence. Although unsettling for advisors and clients alike, market downturns typically reveal the true quality of the advising relationship. When tough times hit, nothing is more important for an advisor than managing time efficiently. Doing it well during the market’s most challenging days means having your house in order. Your priorities are driven by nurturing your firm’s most valuable asset: the trust and confidence of your clients.
Action 1: Develop Your Client Communication Strategy Before Markets Force the Issue
The middle of a volatile market is not the time to develop client communication strategies. On the other hand, firms that best weathered March and April were those that already had in place well-rehearsed, proactive strategies for client communication. The time management principle here is, perhaps, obvious: Have a game plan ready before a market crisis hits — then deploy it rigorously.
- Do you have antelopes and elephants? In other words, are there jumpy clients with short memories who may need more communication than others?
- Can you start practicing with a new medium now, like video messages, to make the next communication more personal?
- If you were both rebalancing portfolios and communicating often, were you able to deliver on your promises to clients on both sides? Were you personally stretched too thin? If so, should you seek out an outsourcing partner like the Wealth Advisor Alliance, so that next time you can focus on client conversations?
Action 2: Build Client Confidence From the Beginning of the Relationship
If you have clearly communicated with your clients and done a good job explaining how their long-term plan is built to account for market downturns, they are less likely to allow their emotions to drive them when the market makes a big move. The more time you can spend communicating strategically with clients, rather than reactively, the stronger your client relationships are likely to be and the deeper their trust in you during all types of markets.
Action 3: During Volatile Markets, Think Like a Client
During the recent market volatility, some firms sent questionnaires to clients requesting their input on questions like the following:
- “Is the pandemic currently negatively affecting your job or your regular income?”
- “Do you anticipate needing to provide financial assistance to family members, and if so, in what amounts?”
- “Do you believe that you will need additional cash to meet unforeseen short-term spending needs, and if so, how much and how soon?”
By obtaining such information from clients, advisors were able to: 1) gain valuable insights into client psychology and 2) reassure clients that their most pressing needs and concerns were top of mind. Advisors also reached out to retired clients to communicate about cash reserves in their accounts, realizing that these investors would want to know if they were able to account for necessary expenses. By anticipating and prioritizing client concerns in this way, these firms increased client confidence levels by assuring clients that their needs were being thoughtfully and professionally looked after.
Action 4: Pick up the Phone
Before the week becomes hectic, advisors should create a habit of reaching out to at least 10% of their clients to start the week. The simple act of leaving a voicemail is a human touch during a time when clients want to know you are engaged. This touch can provide a layer of trust clients are seeking all while providing advisors with the additional guidance on how to best support their clients. We live in a time where sending an email to check in is easy to do but taking a moment to call and hear the tone in someone’s voice can create a deeper connection.
No one knows when the next market downturn will occur. But whenever it happens, the firms that will prosper are those with carefully crafted strategies already in place for communicating with clients. At the Wealth Advisor Alliance, we empower financial advisors with the tools, resources and guidance they need to communicate with clients effectively during periods of market turmoil.
We help advisors establish and grow successful wealth management practices. To learn more about how we can help you amplify your life’s work, contact us at team@waalliance.com. You can follow us on Twitter@theWAAlliance and on LinkedIn.
Sources
1 David Langford and Lorie Cantú, Hillingdon Ranch: Four Seasons, Six Generations. Texas A&M University Press, 2013.
2 Ibid.