Getting Antsy: Advisers Cope With High-Strung Clients

Some investors get jittery even in the best of times—and these are not the best of times. The fluctuations in the stock market have created quite the headache for advisers, not to mention the surfeit of investment information via the Internet and cable news. 

Retirees—some with perhaps too much time on their hands—have legions of financial “experts” telling them about their “hot stock tip.” To make matters worse, this information is often presented in a highly charged, frenetic way—exactly the opposite of how investment advice should be dispensed. “The volatility of this period is reported in a very emotional way that really provokes a lot of emotion in the investor—and that emotion is fear,” says Gary Stempinski, a financial adviser with Raymond James & Associates. “There is a tendency to be fearful and overreact.”

Take, for example, one such jumpy investor at BNY Mellon. Prior to retirement, this entrepreneur made healthy gains in her portfolio, says Mellon’s senior director of wealth management strategies Joan Crain. Then she retired, Crain started getting almost daily phone calls, and the portfolio’s earnings started to deteriorate.

Unfortunately, that’s not an isolated case. “We’re a little worried, even as they partially retire, as we’ve seen they tend to have too much time and too much information for their own good,” Crain said. “They obsess and make knee-jerk changes, and that is bad in the long run for [the portfolio’s] performance. They think they know how to use [this information]. They can bring it up, but they lack the knowledge of how to interpolate it.”

So what’s an adviser to do? Every relationship differs, of course, but communication is always key, says Peter Loftus, a managing director at New York-based Modern Bank. “If you’re doing your job reasonably well, the idea is to get clients into the right risk allocation,” he said, though “it’s never a perfect scenario with anybody because you can never quite gauge someone’s risk tolerance until the market does go down.”

Loftus said the best way to deal with a high-strung investor is to be proactive through these tough times. “The key for [dealing with] a lot of clients when they do have a lot of time is you have to identify who those clients are and almost get ahead of where they are and where they’re going to be,” Loftus said. “It’s much easier to make the outgoing phone call and get ahead of the situation, then take an incoming call.”

Bob Ellis, a senior analyst at Boston-based research firm Celent, agrees wholeheartedly with Loftus’ sentiment. “The thing that makes clients most nervous is when [the adviser] hides from them,” he says. “The best advisers are proactive. They’re almost using the Dow market as a reason to call and a reason to add value by reassuring them.”

Still, there are some clients who are simply “unsatisfiable” and will act impulsively on their own. The best way to deal with them is to be the source of their information, said Mark Halverson, a global executive partner at management consulting firm Accenture. Halverson said there is a growing push to provide more Web-based content to clients, so at least they can make more informed decisions if they act on their own. Such products include AdviceAmerica’s Adviser Vision, Adviser Software Inc.’s Wealth Manager, CGI’s MPlan and EISI’s NaviPlan.

A high-tech website can act as a stand-in adviser for an institution. “The number of minutes that must be spent with folks nearing retirement and in retirement is simply much greater than it’s ever been before,” Halverson said. “Firms are beginning to focus much more on that multi-channel experience, which is, ‘How can I deliver a high touch advisery experience via a multi-channel sales and servicing model.’”

Experts say it’s worth remembering that there’s a reason the client is going to an adviser in the first place. “If they go online [to make financial moves] then they’re going to have to deal with their emotions,” Stempinski said. “Most people, as much as they complain, they don’t want to deal with their emotions. They’d rather be dealing with someone that advises them. The key here is the interpretation of events, interpretation of their investments, interpretation of market conditions.”