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What do you do when the market takes a turn for the worst? Do you wait for the storm to pass and simply do nothing – or do you reach out to clients and reassure them things will get better? According to recent research carried out by Financial Advisor Magazine failure to communicate with clients on a timely basis is the number one reason advisors lose clients. The upshot is you need to be prepared to talk to clients both in the good times and the bad times.
If you need help explaining volatility to clients so that they see it as their friend, not as a threat, get the mp3 compilation, Helping Clients Understand Market Volatility .
Always be prepared for ‘what ifs’
There will always be a crisis – and ‘what if’ – in your wildest dreams – the stock and bond markets tanked simultaneously? How would you do business? Could you do business at all? And while this may seem an outrageously unlikely scenario don’t dismiss it out of hand. It has happened before. Find out what you’re going to say for all ‘ifs and when’s’.
You understand market volatility – your clients don’t
History shows that the stock market and economy move in cycles that repeat over and over. Understanding that is part of your job . You understand the nuances between a bull and bear market. But when the headlines in the paper’s business section turn pessimistic investors lose confidence in the future.
If you don’t have a plan of action, your clients may come to you first and tell you they want to run to the sidelines. If that happens, what will you say? You know it’s the wrong thing to do – but unless you’re prepared to argue your case, your clients may not heed your advice.
Reach out when times get tough
Heed the warning signs at the first sign of a downturn and call your clients. Reassure them that this is just a temporary dip and that things will get better.
Use analogies so you’re talking in terms they can understand.
If they’re driving to visit friends for a weekend break, do they turn back at the first set of roadworks? No, of course not, they put up with the inconvenience and carry on to their destination, because they accept traffic jams are part and parcel of the journey. If they don’t, they will never reach their friends’ house and have the great weekend they had planned.
The same goes for their investments – there will be hiccups along the way to their final goal but unless they stick to the plan, their dreams will go up in smoke.
When explaining volatility to prospects and clients, you don’t want to be brilliant. You want to be memorable. To be memorable, you need stories and analogies. Get the Webinar Replay, Explaining Volatility in a Way Clients Understand , to learn 15 stories to use with clients to help them understand volatility, how to help clients feel comfortable with volatility, and how to focus clients on the inherent value of the security, not its price.
Even if you can’t call every client right away, at least send out an email so they know you’re aware of their concerns. Sending out newsletters on a regular basis is another way to let clients know you’re following market conditions closely – but remain confident that their investments remain safely on track.
Have the discussion about market volatility before a market downturn
If life were perfect, investors would react rationally. When faced with a financial crisis or dramatic public event however, clients’ reactions become emotional affecting their judgement. Investors tend to focus on short-term results rather than long-term objectives, a myopic view often reinforced by the media.
By discussing the ‘what ifs’ with clients in advance e.g. how they would feel should the market decline, you will gain insight as to how the client may in fact respond. Once you’ve recognized their biases you can bring them to your clients’ attention – awareness is the first step.
For ideas on how to help clients commit to the long-term nature of investing and stick to the plan in all market conditions, get the mp3, Simple Truths for Investors .
Related: Do You Have What It Takes to Be an Elite Advisor?
Address issues ahead of time to outpace the competition
Preparing your bear market presentation in a bull market is an essential. If you are fully prepared, know what to do and tell prospects, when the markets dive you will steal a march on your competition and you will keep your clients in check. If you can get them to stick to the plan – you will ultimately be central to safeguarding their future financial security.
Prepare to address issues ahead of time – and you will outpace your competition. They, unlike you, are likely to suffer some dry times when the landscape shifts.