One of the joys of volatile markets is that you can actually remember the lessons of the last big downturn, because it was not that long ago.
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The market has now fallen enough that we are referring to certain dates in 2008 in the statistics overviews. That bear market, the second “once-in-a-lifetime” decline in ten years, took a tremendous toll on advisors and clients alike. And the advisors who managed to keep their clients to stick with long-term investment principles did the best by their clients, and earned more than their fees.
One of the significant ideas to arise from that difficult time was the importance of doing as much asking as telling. This is anecdotal and unscientific but significant observation – the advisors who invested their time telling their clients to hang on fared worse than the ones who asked their clients about their concerns.
, President of Advisor Impact, tells the story of an advisor she spoke to toward the end of that market, who reflected on his experience in trying to calm his clients. “He talked at his clients for two years, tried to say everything’s fine, everything’s fine, everything’s fine, this way, that way, dance a little, but he was beginning to realize that the conversation maybe wasn’t two-way and perhaps that he hadn’t acknowledged their fears sufficiently.”
I remember talking with an advisor who engaged his advisory board
in designing the best way to address clients’ concerns about the down market. They came up with the idea to do “town hall” meetings, each with a brief presentation and lots of time for questions and answers. The meetings were a huge hit.
I remember Bob Curtis
, CEO of PIE Technologies
(who produces MoneyGuide Pro) showing advisors how to communicate the effect of the downturn on clients’ plans rather than their portfolios, and pointing out that the real question on their minds was not “How far will this go?” but “Will I be eating dog food in retirement?”
The best thing you can do for your clients is to acknowledge their fears, let them know you do not know where this is headed (at least short term) and are watching things carefully, and then to ask them what their biggest concerns are and let them speak.