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How to Reach Out to Clients in Times of Turmoil

Look long term and make personal contact to reassure nervous clients.

C. Marie Swift, 11/13/2008

Bankruptcies, bailouts, plunging indexes . what's next? From living rooms to water coolers, bus stops to the campaign trail, everyone is talking about the market. For financial advisors, these tough and turbulent times mean it's even more important to communicate with clients. Sure, you might agree that you need to reach out, but what will comfort your clients? In a word, perspective.

Above all, your clients need reassurance that the rules haven't changed, says Arthur Cooper, principal of Cooper McManus in Irvine, Calif. Accordingly, rather than discuss the market's instability, Cooper has his clients looking inward.

"You hear that the Dow has fallen 500 points and lost 4.5% in value, but it's likely the decline in a diversified portfolio will be less," he said. "We're spending time reviewing clients' original objectives and investment strategies to assess whether their goals are the same and if the investments we chose are still appropriate. If they are, our message is to hold the course."

Agreeing that changes in the client's life, not market swing should prompt portfolio changes, Bill Glubiak, principal of Cedar Brook Financial in Cleveland, said that he personalizes his "stay the course" advice to clients by reminding them of what they have accomplished.

"We use our performance reporting station to review how the portfolio has performed over a longer period of time. Clients are pleasantly surprised and then more able to block out the market noise and focus on their long-term investment horizon," he said.

While it might be tempting to reassure clients via letter or e-mail, Don Patrick, principal of Integrated Financial in Atlanta, points out that there's a comfort for clients in hearing a familiar, calm human voice.

"During the crash of 2000, we spoke with our retired clients quarterly to reassure them they were still on track," he said. "Today, clients who are globally diversified across equities bonds, cash, and alternative are not down as much the individual indexes--and they need to know they are on track to meet their goals. When we call, clients tell us, 'I know what you are going to say--that over the long term we'll be fine,' but there's still value in reaching out."

In addition to telephone calls, Patrick recently produced a market-commentary webcast for clients and is incorporating short podcasts into his Web site.

Clyde Wyatt, principal of Navigation Financial in Dallas, agreed that there's value in revisiting past performance and encouraging clients to focus on the long term, but he added that it's also vitally important that, in addition to imparting advice, financial advisors listen.

"We have to be mindful that our clients are inundated with bad news 24/7 and may feel fearful," he said. "Of course, sometimes as I listen, my clients answer their own questions. In that case, our job is to counsel them that the news stories focus on what happened in the last 24 hours, not over five years, and that they should continue to focus on what they can control and forget the noise."

Bottom line? In a volatile market, investors have three choices--panic and sell, stay the course, or invest more money to take advantage of the decline. Because, historically, the person who sells loses over long term, and financial advisors must convey the "we've seen this movie before" story to clients. With the historical perspective to put recent market events and the value of a diversified portfolio in context, clients will understand the wisdom of staying the course and remain on track to meet their goals.

To listen to the interview I conducted in October with Cooper, Patrick, Glubiak, and Wyatt, visit my Best Practices in the Financial Services Industry blog.

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