Communicating with your clients is becoming more important and more challenging as client fears escalate in the face of increasingly unstable stock markets and deepening concerns about a new global recession and government-debt defaults.
There have been many days in the past few months in which the markets fluctuated by hundreds of points — although it’s worth noting that despite the gut-wrenching moves on individual days, the month of August ended with a small loss of 1.3% for the benchmark S&P/TSX composite index. However, based on historical performance, September is, on average, the worst month for stocks, and October has had more than its share of severe market crashes.
“It’s important to be proactive in communicating with clients in these times,” says Julie Littlechild, president of Toronto-based research firm Advisor Impact Inc. “No matter how much flying I do, if we’re experiencing turbulence, I always feel reassured when the voice of the captain comes on and explains the situation.”
Similarly, financial advisors who demonstrated leadership qualities during the market meltdown of 2008 and kept their clients focused on the long term inspired the most client engagement and loyalty, she says: “Some advisors did nothing in 2008, and some communicated a lot. But too often, it was a one-way conversation in which they did not empathize with the way clients were feeling. Those who listened to clients express their fears, acknowledged the emotion and helped clients focus on their long-term goals had the most impact.”
Tough markets present an opportunity for you to demonstrate your value to your clients — much more so than in buoyant times, when strong investment returns are the norm. The goal is to provide encouragement and reassurance, the opposite of the “Chicken Little” approach, says Sandra Foster, president of Headspring Consulting Inc. of Toronto: “Clients want to hear from their advisors after a turbulent period. It’s important to talk about what they’re seeing in the headlines and not to take a sales approach. Clients are a fearful lot, and they need to be helped through difficult periods and to know their advisor is paying attention.”
The key is to ask your clients how they’re feeling, then be quiet and listen, says Donna Harrison, a certified financial planner with Wise Advisory Group Inc. in Oakville, Ont. If the client is extremely anxious, you may want to suggest a face-to-face meeting. “The advisor is like a coach,” she says. “The advisor must be there, front and centre, particularly in bad times, and must listen and respond.”
Although telephone calls are a more personal approach, emails can also be an effective way to let your clients know you’re paying attention. Adrian Mastracci, portfolio manager and president of Vancouver-based KCM Wealth Management Inc. , sends frequent emails to his clients in which he comments on the news and reinforces a rational approach to market turbulence. “The goal is to reassure clients, to let them know we’re on the ball and are watching what’s going on,” he says. “We know we’re in slow-growth mode economically, and it’s important to set appropriate expectations.”
Client portfolios should already be positioned for volatility, with equities exposure appropriate to clients’ risk tolerance, says Tina Tehranchian, CFP and branch manager with Assante Capital Management Ltd. in Richmond Hill, Ont. In fact, a balanced portfolio will be less volatile than the stock markets.
Along with some webinars and regular emails, Tehranchian has been calling nervous clients whom she feels need extra reassurance. It’s important for the advisor to be calm, she says, and this comes from confidence in the recommendations you previously made to clients. “The idea,” she adds, “is to give comfort to clients and let them know [their] advisor is there, watching markets and their portfolios.” IE