Surviving the Crisis: 5 Tips for Advisors in a Time of Market Turmoil

By D. Bruce Johnston, President & CEO, Advisolocity on Tuesday, August 16th, 2011

Today’s news coverage says it all: words like “plunging stocks,” “massive volatility,” “lowest levels,” “looming recession,” "double dip," and “rout” are liberally peppered throughout much of the media.

In this environment, it doesn’t take long for the pundits and talking heads to start discussing what an advisor should be saying to his or her clients. It comes with the turf, and is certainly no surprise. Because the fact is, as your clients struggle to make sense of a situation they can’t control or comprehend, they will increasingly turn to you for context, calm and comfort. You need to communicate with them clearly and unequivocally. That's why I recommend that you make the following five pointers the guideposts of your "crisis mode" communications (they're good everyday pointers, too, regardless of a "meltdown").

1.) Pick up the phone.  

As obvious as this one is, it's often neglected. There will be a leading research report issued within a few months that states that more than 40% of clients are not being contacted during the crisis that has followed the S&P credit downgrade. We've seen this type of inattention before. It happened in 1999-2001, 2008, and it's happening this time as well. And there are additional research figures, too: 40% of clients state they would change advisors if they received a call from a new advisor asking them to move their business.

2.) Ask your clients about their concerns

Needless to say, the purpose of this question is not to increase AUM for your firm. Rather, it's to deepen your relationship with your client and to continue to establish yourself as their trusted advisor. You need to know what makes them tick, and there's no better time to get a read on them than at a time of crisis and volatility.

3.) Reinforce your strategy.

Your clients have entrusted you to help them achieve certain short- and long-term financial goals. Let them know what form your strategy -- indeed, your vision -- is taking. And by the way, if there ever was a good time to remove the ticker tapes – oops showing my age – stock quotes from your website, this is it. When clients visit your site and view all the red flashing numbers, they're not getting the impression that your firm stands for good advice and planning.

4.) Put the markets into context for your clients.

Sure, it's easy for clients to panic now. That's why, as you reinforce your strategy, you'll also want to put the markets into context. While it's true that the US downgrade is probably a once-in-a-lifetime event for all of us, we have all seen extreme volatility before. Have a discussion with your clients about how their portfolio has been constructed to achieve certain long-term goals. Likewise for those clients with shorter time horizons as well.

5.) Warn about the "too-good-to-be-true" promises that proliferate during a crisis.

Here in the post-Madoff era, it's especially important to communicate with your clients. Let them know to beware of promises that "guarantee" them:

  • Unusually Attractive Returns. This is an old but effective tactic. During a time when clients have seen their portfolios erode by 30%, 40%, or 50%, these promised returns begin to look very attractive. Think Allen Stanford’s high interest rate CD’s.
  • Unusually Steady Returns. Classic Madoff…with steady and consistent returns "assured" over a long period of time. If the current situation has taught us anything, it's that investment returns fluctuate!

Not talking to your clients? Someone else is!
Today's clients are baffled, confused and in some cases irrational as they struggle with the events of the past two weeks. They need to hear from you. Because one thing is for sure: if you’re not talking with your clients, someone else is. In today’s connected world, I can safely say that they're receiving solicitations from other advisors and/or researching the web for answers.

To summarize: in our new, wired world -- in a time of acute market uncertainty -- it's your responsibility to call, ascertain concerns, reinforce strategy, put today’s events into context, and protect clients from false promises (and from themselves).    

You Might Also Be Interested In:


comments powered by Disqus