With markets whipsawing in recent weeks, some financial advisors are considering the best approach to contact clients and keep them on track with their financial plans.
Some are being proactive, reaching out to everyone either individually with a phone call or through mass-communication, such as an e-mail or newsletter. Others are standing down and letting clients come to them if they need to talk.
It’s a delicate balance between keeping clients informed and not fuelling fear. Some clients want to stay on top of the market news while others aren’t interested in tracking the daily movements in their portfolios.
An advisor’s approach often depends on how well he or she knows and understands their clients, says Sara Gilbert, a business strategist and certified coach with Strategist Business Development in Montreal.
It’s about “how deep the relationship and connection is with their client, above and beyond their financial goals,” she says. “Do they know their client’s deepest fear, insecurities, their aspirations and dreams?”
Ms. Gilbert says advisors need to know the client’s “ultimate motivator.” For example, she says a client who’s close to retirement will likely want to hear from their advisor on how the latest market downturn might impact that plan.
“The biggest role of an advisor is managing emotion,” says Ms. Gilbert, who believes that reaching out to clients in some way during times of market volatility is the best approach.
She says investors can get consumed by negative headlines about the direction of the markets and start to fret. “Our role is to bring them back to their ‘ultimate motivator,’” she says.
Preet Banerjee, a management consultant to the financial services industry and founder of Money Gaps Inc., an online financial planning tool for advisors, says advisors should be proactive in communicating with clients when markets are volatile.
“This is a big part of their value proposition: How they handle periods like these with their clients,” he says. “It’s an opportunity for an advisor to demonstrate the value they bring to that relationship.”
Mr. Banerjee recommends advisors use e-mail blasts, social media, webinars and other mass communication strategies to connect with clients. “You want to reach as many people as you can as fast as possible,” he says.
It can also a good opportunity to pick up new clients who might be frustrated with their current advisor and looking for someone else.
As such, advisors should encourage prospective and existing clients to reach out if they want to talk more, Mr. Banerjee says. He adds that advisors should reach out individually to certain clients they think might not be handling the market volatility well.
“You probably know who your clients are who are a bit squeamish when markets are turbulent,” Mr. Banerjee says. Call them first. “They’re waiting for you to reach out.”
When talking to clients, Mr. Banerjee recommends shifting the focus away from the short-term market swings to the long-term focus of clients’ financial plans – and reminding them that downturns are part of it.
“These short-term periods of volatility are the price we pay for higher long-term potential returns,” he says. “We don’t know what will be the cause of that volatility, but we know it happens. It’s not unexpected.”
Dan Bortolotti, portfolio manager at PWL Capital Inc. in Toronto, had taken the position of not contacting clients proactively – until now. When roller-coaster stock markets first started a couple of weeks ago, Mr. Bortolotti says he didn’t want to come off as alarmist. However, he has since reconsidered the strategy now that the markets are in official bear territory.
“The fear and panic is much more acute than it was even a week ago, and I worry my clients will wonder why they haven’t heard from me. I think some proactive reassurance is appropriate now,” he says.
That said, Mr. Bortolotti believes that many of his clients understand that market swings are part of investing as a result of the conversations he has had with them over the years.
“People know we have a long-term plan,” he says. “They know whenever they send money, whether markets are up or down, we invest according to their target asset allocation.”
Since the coronavirus outbreak started to weigh on markets in late January, Mr. Bortolotti says there have been very few incoming calls from clients. Among those who have called, some wondered if it’s a good time to buy; others just wanted to reinforce their investment plans.
“I’ve had a lot of experience with people who say, ‘Should we do something [amid the market volatility]?‘” he says. “They know my answer, which is to stay the course. At the end of the conversation, they say, ‘I knew what you were going to say. I just wanted to hear you say it.’”
Mr. Bortolotti says advisors should always answer questions respectfully – especially if clients are panicking.
“It’s problematic when people have their fears dismissed by someone saying things like, ‘Don’t worry, this stuff happens. It’s not a big deal.’ You can’t tell people that. It’s insulting. It’s their money. You need to provide some comfort,” he says.
It’s all about reminding clients of their long-term plan, Mr. Bortolotti says. “If you can coach people through these periods and keep them on track, think of the value you add.”
This article has been updated to include revised comments from Dan Bortolotti in light of the latest market downturn.