No news is bad news for your clients

01 April 2011 Esm? Davies, Celestis

Research has proven time and time again that clients need their advisors more than ever during trying times.

There can be little doubt that the local and international economic situation over the past two years has been challenging for even the most experienced financial advisors. And, if this has not been enough, the recent crisis in the Middle East, together with the deadly strike of natural disasters in New Zealand and Japan, have added to the woes of already volatile international markets and low investor confidence.

Will you be there?

If you are finding the current situation difficult and uncertain, just imagine how your clients must be feeling! As their financial advisor, you are regarded as the person with the knowledge, experience and leadership skills, and they are looking to you to put the chaos in perspective.

In a study by Prince and Associates in the US, advisors were asked why they do not contact their clients during and immediately after volatile situations. Their answers included that they were too busy putting out fires or handling incoming calls, they did not know what to say, wanted to wait and see what was going to happen or were afraid of clients being upset. Do any of these sound familiar?

Proactive communication is key

As a financial advisor, you need to understand two things about the dynamics of risk and the effect it has on people. Firstly, people are more likely to be afraid of something if it affects them personally and, secondly, people are generally more afraid immediately after they experience a scare. This reinforces the importance of proactive communication.

Communicating with clients during volatile markets can turn an unsettling time into a period of calm and reassurance for clients. Clients will also get a sense that they are important to their advisor because of the time taken to communicate directly with them.

What to say?

Firstly, remember that you need not have all the answers at the outset. Getting in touch is often enough.

• Tell clients not to panic or make rash decisions.
• Emphasise that mainstream media often overstates the size or magnitude of the crisis.
• Remind your clients that markets do recover.
• Make appointments to revisit your clients’ financial plans to review whether their original goals are still valid.
• Revisit your clients’ attitude to risk. Has it changed? Is there a need to reduce the clients’ exposure to risk?
• Make the necessary portfolio changes where cash flow in the short term has been compromised.
• Educate your clients about future market volatility and remind them that financial planning is a long-term initiative.
• Increase your overall touch points with those clients who are genuinely concerned about the fact that they may not have enough money. Understand that some people will need some hand holding until the worst is over.
• Make sure that you capitalise on the opportunities that cheap markets may hold.

Act and educate

Difficult times call for action and education, efforts that will be rewarding and beneficial for both you and your clients. As a trusted, knowledgeable advisor, you need to be proactive. Advisors who demonstrate that they have their clients' best interests at heart will expand their practices.

“An informed client is an empowered client, empowered clients are satisfied clients, and satisfied clients are the best source of referrals and new business.” - Michael Eisenberg, owner of Eisenberg Financial Advisors in Los Angeles, CA

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