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Everyone needs a hug sometimes. OK, maybe clients are not expecting physical contact during times of stock market weakness, but the new CBS series Elsbeth is doing so well, I thought that was an appropriate observation. Regarding “uncertain times” every day can be an uncertain time for the stock market, but we don’t know it ahead of time.
When the stock market is suddenly not doing well after it has done well, many clients get unnerved. They are distinguished from online investors because they pay for advice. What are some reasonable expectations?
1. Leadership. Some people think ostriches bury their heads in the ground when they sense danger. Apparently, that is a myth. Clients do not want an advisor who is just as scared as they are scared. They want the “We are all in this together” mentality. They want some “What if” scenarios, so they are not expecting the worst outcome from their scare mongering friend to come through.
Trait: They want answers. Why is this happening? They want possible outcomes based on different scenarios. Your research department should already be providing this information.
2. Listening. Your client likely wants to vent. I blame the James Bond movie franchise for creating view that there is always a villain. This decline is someone’s fault. Often, they think it’s the advisor’s fault because they assume you saw the decline coming and neglected to tell them.
Trait: The advisor needs to let the client get their frustration out of their system. The client does not want your counter points because that becomes arguing. They should feel better after they have vented. You can add your counterpoints at that point if you feel it is important. Although you are listening, the advisor should not be accepting responsibility for something that was not their fault.
3. Give me a break. Those counter points might include “I hold you we should rebalance when equities were overweighted, but you said no.” (All those conversations were likely noted by you in your CRM system.) They do not want to be reminded they said “Bonds are boring” multiple times, thinking they are a comic genius. Put another way, they don’t want to hear “I told you so.”
Trait: You are exhibiting tact when you skip over allocating blame and focus on “What should we do to move forward?”
4. Experience. If you are an experienced advisor, you know markets are cyclical and you have seen declines before. Although past performance is no guarantee of future results, you have heard history repeats itself. Lean on factual data concerning previous market declines. The Ibbotson Mountain Chart might be on the wall of your office.
Trait: Lean on your experience. Talk about past market declines. If you are newer to the business, perhaps you have a more experienced team member you can bring into the conversation. If not, your research department has probably written up a report with talking points.
5. Relevant expertise. Many clients consider their own situation incredibly unique. Some advisors find many clients are in a similar situation. If a problem needs to be solved, lean on your experience in solving this problem previously.
Trait: Demonstrate relevant expertise. This might involve expressions like: “This is not the first time I’ve seen this situation. I have solved this problem for other clients, and I think I may be able to solve it for you too.”
6. Reassurance. In many cases clients have been referred. They had a friend in a situation similar to theirs. You demonstrated the relevant expertise needed to solve their problem. That client sent this friend to you.
Trait: In this case, reassurance of confirmation cannot be arranged by you in advance. You hope the nervous client calls their friend and the friend gives another glowing recommendation of your skills, suggesting they don’t second guess you and let you do your job.
7. Access. When clients are nervous, they want reassurance. The above example referenced the person who referred them. In many cases, they want reassurance from you. They might call or get in touch multiple times. They do not want to be told they are behaving like a child. They want that conceptual hug referenced at the start of the article.
Trait: They want you to demonstrate patience. They want you to comfort them, even if they call day after day. They want to feel, at that moment, they are the most important client in the advisor’s book. As an FYI, our advisor did that very well during the Great recession of 2008.
8. Vision. They want someone to be able to look beyond the fog and confusion happening right now and see what things might look like one, three or five years from now. They need to be reminded why they own the stocks they do and the trends driving their success.
Trait: The advisor needs to see the big picture. They need to identify trends; confirm they are still in place and what companies are major beneficiaries of these trends. They need to be reassured that company management knows what they are doing. Your research department has probably done all this work for you.
9. Empathy. They need to know you feel their pain. If you did not invest yourself, you might come across as a friendly croupier at the casino. If you are wildly wealthy (and they are not) they might feel a loss that feels substantial to them is insignificant to you.
Trait: They need to feel understanding and identification. You are in the same situation. You are not detached.
10. Past success. Years ago, I knew a fellow who explained he referred about 50 fellow senior executives to his advisor. He explained how the advisor asked for those referrals. He was glad to do it. Almost as an afterthought he added, “Of course, the advisor has to have made you money before you would refer them.”
Trait: You need a track record. Having made money for others gives you confidence. While maintaining confidentiality, you are mum about client identities. The client likely knows a few. They call them for reassurance and are reminded of your successes.
11. Discounting. This is an action you might consider on a case-by-case basis. If the client is really losing money, you might want to reduce your fees on a temporary basis, showing solidarity with your client’s situation. It would be important to establish the time period for this discount in advance.
Trait: You want to show the ability to be flexible and compromise. If they are losing big money, they mention fees and you refuse to compromise, they might reframe to relationship as “us vs. them.” You are them.
12. Ideas. During a past market decline, I remember hearing one of the really great coach/trainers tell advisors they need to be proactive with suggestions, even if the client shoots them down. His logic was: “After this is all behind us, won’t the client say: “When all this was happening, shouldn’t we have been doing something?” Put another way, your lack of ideas is now held against you.
Trait: You need to be optimistic, creative and proactive. You need to see a better future and provide ideas for the client to get onboard with your vision.
When the stock market declines, it is important for advisors to show leadership. This is what clients are paying for when they work with an advisor.
Related: Ten Myths Why Clients Leave (And Getting Them to Stay)