In Times of Turmoil, Communication is an Advisor’s Best Friend

 

The extreme stock market moves of the past week have understandably put investors on edge. Wealth and investment managers aren’t sleeping too well either.

The latter are not so much concerned about the long term health of portfolios — they know this too will pass. They fear clients will blame them for neglecting to take some kind of preventive action. For failing, in other words, to time the market like a financial action hero

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Unfair? Sure. But many advisors have only themselves to blame for their clients’ freak outs. Apart from legalese about the risks of investing, they fail to adequately educate them about the realities of the market. About how properly diversified portfolios really work. About the long-term opportunities in market drops. 

The time for these conversations is not the day after a 500-point plunge in the Dow. It is every day. As one financial advisor told me over breakfast a couple of weeks ago, “the best time to communicate with clients is when there’s no news to deliver.” He personally contacts each of his clients quarterly to check in and find out if they’ve had any major changes that affect their financial situations. “No emails. I pick up the phone,” he says. “Occasionally I learn that there’s been a divorce, or a child has dropped out of college. But mostly it’s about reminding them that I’m here.”

Such one-on-one conversations aren’t always practical when you have 50 to 100 clients surrounded by voice mail moats. And once-a-quarter communications are not enough anyway. That’s why successful wealth management firms use blogs, videos and newsletters, not only to reach out to prospects, but to stay top of mind with existing clients. “A little paranoia is good in this business,” another advisor told me. “I see all clients as one downturn from walking out the door. They are constantly being approached by other firms. When the market slips, those pitches must sound pretty good.”

Granted, it’s not easy to maintain good client communications when you have a hundred other things on your plate. Nor is it cheap. But compared to the cost of replacing clients who rebel at feeling left out in the cold, it’s a pretty good deal.

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Niles Howard is a principal of Wall & Main.

 
Niles Howard