The Client Calls You Need to Make Today

September 30, 2014

by Dan Richards

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Even clients with a long-term view get nervous. How do you handle their anxiety when we encounter a couple of the weeks of market downdrafts like the ones we’ve just seen?

“It drives me crazy,” said Jeff, a veteran advisor whom I spoke with on Friday. “The markets have a hiccup, and clients who three months ago confirmed that they’re in it for the long run are on the phone wondering if they should sell.”

In the last couple of weeks, stocks were down less than 5% from their peak. “In the grand scheme of things, that’s a rounding error,” Jeff continued. “But based on some calls we’ve got, it’s like the world’s coming to an end. And of course, it’s the same clients who call every time markets have a bit of heartburn and I have to talk them off the ledge. This sucks up a ridiculous amount of time and energy. I’m sick of these conversations and wonder if I should just punt the nervous Nellies in my client base. ”

It’s understandable that advisors get frustrated when clients panic after small declines in the market. Here some strategies you can put in place to minimize the disruption and actually turn market downturns to your advantage.

Go on the offensive

Client worries today have little to do with the magnitude of recent declines. Rather than dismissing anxious clients as “nervous Nellies,” understand that concerns stem from a number of issues:

  • Recent headlines have been dominated by macroeconomic concerns such as the Ebola virus, hostilities in the Ukraine and terrorist threats in the Middle East.
  • In the last few months, the media has featured considerable coverage of elevated valuations for U.S. stocks – and large one-day declines increase the concerns arising from this coverage.
  • As they move into retirement, clients feel more vulnerable to market declines – and in some cases, there’s still a hangover from the global financial crisis six years ago.

Whether or not these are good reasons to be concerned, they cause some clients to worry – with the result that they call advisors such as Jeff, asking whether they should reduce their market exposure. One issue is that when the client initiates the call, advisors find themselves on the defensive, explaining the rationale for the existing portfolio.

That’s why advisors should pick up the phone this week. Contact clients who, based on past experience, are likely to be nervous.

There are three reasons to take the initiative here. By making the call, you can frame the conversation in a positive way and avoid being on the defensive. Some clients will be reassured that you’re on top of things – the thought process is that if their advisor is worrying about markets, they don’t have to. And finally, in my 2009 article on the power of proactive calls I explained how by initiating the conversation, you get much more credit in clients’ eyes than if they place the call.

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