A Reminder to Communicate with Clients in Volatile Times

Posted by Joni Youngwirth

Find me on:

May 21, 2019 at 10:00 AM

communicate with clientsThough it sometimes seems otherwise, the financial crisis wasn’t that long ago. Baby-boomer clients were 44 to 62 years old in 2008; they’re 55 to 73 years old today. And they still make up the majority of most advisors’ clients and assets. But even though the demographics and net worth of your client base may be similar, the market gyrations in late 2018—and more recently with renewed trade tensions between the U.S. and China—don’t seem to have resulted in the same level of anxiety among your customers as they did back then.

Eleven years ago, market trauma caused most advisors and clients severe angst. Consequently, you were encouraged to proactively communicate with clients, even when you didn’t think it necessary. Remember all those articles and webinars that explained how to soothe clients’ woes? Advisor compassion fatigue was commonplace, as you took call after call from clients worried about their diminishing retirement savings.

Why hasn’t there been the same level of buzz recently? After all, those baby-boomer clients are closer to or already in retirement. They’re making critical decisions about their finances and drawing down their assets now. How come they seem to be taking market volatility in stride? Let’s consider some possible reasons for this attitude change.

Taking It All in Stride

Did clients get smarter? Have clients truly learned that markets go up and markets go down? Have they learned that they gain nothing by panicking or by knee-jerk selling and buying?

Is it too soon to get anxious? We’ve seen increased volatility since October 2018, and we even entered a true market correction (i.e., the S&P 500 was down 10 percent from the peak) in early 2019. Is it too soon for clients to feel the pain? Or have advisors done their part in communicating with clients to keep them calm before the anxiety has a chance to set in?

Is it different this time? My colleague at Commonwealth, Brad McMillan (author of The Independent Market Observer blog) asks this question frequently. The answer in this case is yes—many analysts, Brad included, believe that economic fundamentals are strong enough to weather the volatility. Do clients hear that theme coming through the media?

Have advisors made a shift? For years now, we’ve talked about how advisors need to shift from a focus on investment management to a focus on more holistic financial planning. Could the current calm be due to advisors having heeded the warnings? Perhaps they’ve decided that chasing performance is only as reliable as the last bull market. Has this shift helped clients understand that daily market performance may cause their portfolios to increase or decrease in value, but that goals and objectives can still be met?

Has the industry shifted? As noted above, for years industry publications and gurus have talked about the investment advisor-to-financial planner trend. Maybe the move has occurred. Granted, some advisors have embraced a planning orientation from the get-go, but many still make a living by promoting their ability to outperform the market. And, even though we still struggle to attract new advisors to the industry, perhaps many who have entered have been adopting a financial planning approach and encouraging clients to sit tight.

Reinforce, Relax, Repeat

No matter why clients remain relatively calm, it’s still early. Market volatility may be with us for quite a while, so the same best practices you learned in 2008 about how to communicate with clients in volatile times need to be implemented today.

Certainly, social media posts, newsletters, and so forth are important and can be effective. But it’s better to pick up the phone and speak with clients directly to ensure that they know what you know—that their portfolios were constructed with long-term goals in mind. Invite clients in for a review if that’s what they need to feel supported. Some clients may be timid. Give them the option to feel secure.

Of course, you should also use social media posts and newsletters. But be sure that they reinforce—and do not replace—the themes you share individually with clients. No matter how often you tell clients that market fluctuations are normal, people need reinforcement to stay the course.

Also, keep in mind that volatility is stressful for advisors, too. You don’t control the markets, but they affect everything you do with clients. Don’t forget to practice self-care, however you define it.

If nothing else, remember that, even if your phone isn’t ringing off the hook, your clients do need you now.

Have you noticed any changes in how your clients are reacting to recent market volatility? Are they more or less concerned? We’d be interested in your thoughts, so please comment below!

Editor’s note: The original version of this article, “Communicating with clients in tough times,” appeared on investmentnews.com on February 5, 2019.

A Guide to Valuing Your Financial Advisory Practice

Topics: Practice Management

   
New Call-to-action
The Independent Market Observer, Brad McMillan

Follow Us