A communication guide for the market downturn
Thu, November 8
Stephen Wershing
  

It’s coming. It is a bear market. Not sure when, but it is inevitable. Boost your business by being ready for it.

Advisors who appear on top of a downturn, who have a process for dealing with it, inspire confidence in clients, retain more clients, inspire loyalty, and get more referrals. So how can you be ready?

Have a communication plan. Just like financial planning, right? Have a strategy. Know what you will communicate and when. And the best time to work that out is before anything disruptive happens. Here are a few tips on what to consider when putting together your plan.

Know when to broadcast something. I see an interesting dichotomy across client advisory boards. We have been asking them when their advisor should send an out of cycle communication in response to a market decline. In other words, how far does the market need to fall before your advisor should send a message about it? And we get two different answers.

If your firm is in the practice of sending out regular market updates, even if only in quarterly letters, your clients are likely to see an additional communication as helpful, providing additional insight. If your firm tends not to send out regular updates on the markets, a special bulletin responding to market events may just make them more anxious. The way I have heard it form boards is “If my advisor is moved to reassure me about the market, it must be REALLY bad!”

One gauge of when to send out a message is the number of calls you are receiving from clients asking about the effects of a declining market.

Say something useful. Clients don’t actually care about where the market is headed as much as what that means for them. They want to know they will be able to have the lifestyle they want when they want it. If they express an interest in the performance of their portfolio or the market, it is because that’s what will enable the lifestyle.

So don’t talk about investment management. Speak to the fear. “Stay the course” is good advice but it wears out quickly if the market continues heading south.

Bob Curtis of PIE Technologies (makers of MoneyGuidePro) said something insightful during the decline of 2008. Clients are not that concerned about the current value of their portfolio (especially compared to last month). They want to know they won’t be eating dog food in retirement. He discussed updating plans to assess where clients were on their strategy and whether any adjustments were called for. Frame your communications in terms of financial plans rather than market performance.

Let clients know you have a strategy. Especially after 2008, clients are hesitant to just ride it out. I know, if they did they would be fine, but it never feels that way at the time. Alternatively, had you bought back in during the first quarter of 2009 you’d be a hero.

I did an advisory board earlier this fall for an advisor who has specific plans on what to do in response to specific market events. Probably half his board indicated that approach was a significant factor in their choice to become a client. They indicated that it made them feel like he was keeping an eye on things. That he was ready for when the bad news came. It gave them confidence.

Another client (of a different advisor) described what he wanted to know:

Bear markets are stressful for everyone and strain relationships. Reduce that stress by having a communication strategy defined and ready to go before you need it. 
Article originally appeared on The Client Driven Practice (http://advisorchecklist.com/).
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