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Reach Out and Touch Someone

Maintain client relationships with little effort and a few well-chosen words.

David J. Drucker, 03/20/2008

What do busy clients want? The same thing you want: to be kept in the loop in as few words as possible.

In other words, tell me what's going on--in fact, anticipate my questions--but make it snappy. Let's face it, we're all time-challenged. What's good for us is good for our busy clients. And even retired clients are busy clients, with some busier with volunteer activities, part-time jobs, and grandchildren than when they had full-time jobs.

One stimulus for required client communication most advisors know well is market volatility. Clients react one of two ways to market volatility. Either it doesn't particularly bother them as long as they know you're always doing what's best for their money, or it bothers them a lot even though they know you're looking out for them and their accounts. Either way a communication anticipating their outright fears or repressed concerns is a good idea-especially if you fire off something before clients start picking up the phone and inundating you with time-consuming calls.

Leslie and Paul Strebel, owners of The Strebel Planning Group (comprising various accounting and planning firms) in Ithaca, N.Y., are some of the best I know at communicating faithfully and efficiently with their clients. When news surfaced of a subprime market crisis, and its affect on the stock markets became apparent, the Strebels immediately mailed clients a letter, a review of which reveals some hidden secrets to client communications.

In their first paragraph, the Strebels get right to the point: "Every so often, it becomes clear that a letter regarding recent market performance (or lack thereof) is a good idea. It is important that you know we are monitoring the market and the assets we manage very closely. It is also important to add some perspective during a time when people are often prone to behaviors based on their fears, rather than on sound investment principles."

This gets to the heart of most clients' fears right off the bat. It says, "We're on the job, we're watching the market, so rest easy and don't do anything crazy."

The Strebels' letter goes on to give an example of "crazy:" "Recently a client e-mailed asking if they should suspend contributions to their 401K plan until things stabilize. Our response was that the wisest action would be to increase their contributions, as everything is currently on sale! It is typical for investors to want to purchase shares when they are high, rather than when they are low. This is the exact opposite of what they should do. Consider other purchases...don't we specifically wait for a sale to come before we take action?"

This paragraph seeks to remind the client of the education he's no doubt been given many times, but which must be constantly reinforced, to the effect that stocks are just like other commodities--they go up in value and they go down in value; our job is to buy when they're on sale, much as we would a luxury handbag or an exotic food item.

The letter goes on to say, "In spite of this harrowing start to the New Year, our portfolio strategists (who comprise some of the largest and most well-respected names in the industry) are bullish for the prospects for the current year's market performance. Many feel that the reaction to the sub-prime situation is a case of the pendulum swinging the other way. Although this is a very serious problem, we observed the markets reacting in similar fashion to the technology and hedge fund bubbles bursting. Those who rode it out were handsomely rewarded. Those who sold in a panic locked in their losses, often waiting for the market to come back up (when everything was once again selling at a high price) before getting back in. It is this ongoing cycle of buying and selling at precisely the wrong time that results in so many investors receiving much poorer results than the underlying investments."

In other words, client, "We have experts and you have us, so don't let the panic you may feel motivate you to do an 'end-around' that causes actual losses you could avoid by just staying invested and waiting for a recovery."

The Strebel letter next says, "The question to ponder is this: As an investor, is your goal to make a killing in the market, or to avoid getting killed? As advisors, our goal for you is the latter. Our benchmark for success is whether the goals we have identified in the financial planning process are still on track. We also encourage you to visit our Web site at www.strebelcpa.com and take our Risk Tolerance Questionnaire. Even if you have taken it in the past, it is a helpful tool to see how you actually react to market volatility, rather than the hypothetical response you'd predicted when the markets were more stable. We will be in touch to discuss the report we have generated as soon as possible. The results of this will help us to guide you [in] making appropriate adjustments to your portfolio."

This is quite brilliant, actually. The Strebels understand what's elusive to most newer planners--namely, that what clients say and what they do are often two different things. Let's say a client comes to you with most of her nest egg invested in large CDs. She needs a better return than the CDs provide to make her money last throughout her old age. Upon filling out your risk-tolerance questionnaire, you see she's willing to accept the risk associated with a more balanced portfolio of money market instruments, short- to intermediate-term bonds and equities. Yet, when the market's down 10% because ill-advised mortgages were given to ill-prepared borrowers--causing a 5% paper loss in your client's balanced portfolio--you find her panic belies the more courageous view of herself you saw in her initial questionnaire results.

Understanding this, the Strebels suggest to clients that they retake the risk-tolerance questionnaire, which will serve to convince them that a) they were optimistic in the way they initially portrayed their appetite for volatility versus return, and b) they share the responsibility for their drop in account value because they communicated to their advisors that they're more eager to take on risk than their experience now suggests. A fine-tuning of risk profiles is required with many clients, so the Strebels are using the market downturn as an opportunity to initiate this process.

Finally, the Strebels write, "One more item to consider is our tendency, as human beings, to extrapolate current conditions into the near and far future. This is why, when the markets are returning exemplary numbers, we remind you that it will not always be this way. And it is why, right now, we encourage you to maintain a long-term perspective and remember that this, too, shall pass. Please contact us with any questions or concerns you may have."

With their closing paragraph, the Strebels appeal to both common sense and client emotion to remind clients that the sky isn't falling and everything's under control. They invite clients to call them, but 95% or more probably never will because the Strebel's letter has anticipated their concerns.

So how do you maintain client relationships easily? Anticipate client worries, communicate with them before they communicate with you, and do it in a way that is efficient: namely, a single-page letter or e-blast (if they check their e-mail daily) that they can read quickly and gain confidence from, allowing them to return to their other, now-more-pressing concerns.

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