Fifteen years ago, I was a first-year associate at Goldman Sachs. Like most new advisors, I was preoccupied with searching for new clients. My manager, Josephine Linden, had a single requirement of every financial advisor in the office: Any day the Dow dropped more than 200 points, we were required to call every client in our book. These past few trading sessions have given advisors plenty of opportunities to call our clients.
Before the days of managed accounts, advisors had to dial clients for every trade. While this type of connection is now the horse-and-buggy of our industry, there were also some benefits. A traditional brokerage relationship requires constant communication with your clients. In those days, it was not uncommon to reach out to certain clients daily with an update on the day’s research reports.
Fast forward to today.
Many advisors have managed accounts and TAMPs where the trades are being handled by third-party managers. There are also discretionary accounts where there is no need to confirm trades constantly. While this business model is more efficient, it becomes easy to turn your back on some clients.
Not only has our business model became low-touch, we have also had extremely calm and serene financial markets. U.S. equities delivered positive returns in every month of 2017, a feat which has not happened since 1958. We have not experienced material volatility since the "flash crash" of 2010.
Had you relied on my Goldman manager’s advice, you may not have called some of your clients in over a year. Until now. We are in the midst of dramatic volatility. One day, the Dow first posted its single-largest point decline in history. Then it notched its best day since 2016. What a great time to call clients.
Robo advisors promote the fact that they take emotions out of investing. But are their clients devoid of emotions? I think not. Whether professional investor or layman, it is impossible to watch the 1,600-point intraday drop in the Dow and not feel something. Clients need reassurance. Some need hand holding. They know what they are supposed to do, but will they actually do it? Will they have the fortitude to stay the course? Many admire Warren Buffett, but few clients have his stomach for risk.
This is where competent and confident advisors shine. We provide that needed gut check. That reassurance that comes from knowing the client’s most intimate personal details. Clients look to us to not just be a steady hand on the portfolio, but also a therapist and voice of reason. Our job is to refocus them on the things that matter most — their families, their charities and their goals.
What did those early 200-point down-day phone calls sound like? At first, they were nervous recitations of facts and data points designed to calm myself as well as the client. After some practice — in 2008 I had plenty of opportunity to make these calls — the Dow became an afterthought. It became a routine opportunity to check in with the client. The 200-point drop was no longer the focal point of the discussion, it was more like a reminder bell that sparked a conversation and prompted me to deepen my client relationships.
Let’s face it, no one wants to discuss gloom and doom all the time. Our clients care about much more than the daily fluctuations in the market, which in the long run will prove to be inconsequential. They want confirmation that they will be OK. And that the sun is still shining. And that their Social Security, pension or dividend check won’t bounce.
QuoteThis is a great time to reach out to the prospect who got away, especially someone who was satisfied with a current advisor simply because the performance was positive.
There is one more benefit to a market correction that most seasoned advisors will appreciate: It’s a great opportunity to land some new clients! Some advisors call it a “wallet-share” opportunity, but I view it as a “mind-share” opportunity. Volatility creates uncertainty and fear in clients and prospects. This is a great time to reach out to the prospect who got away, especially someone who was satisfied with a current advisor simply because the performance was positive.
Let’s not kid ourselves: In a stock market that has gone straight up since March 9, 2009, it has been one of the easiest times in history to be a financial planner. However, with some financial turbulence, some of the less market-savvy among us may find themselves exposed. And their clients will begin to ask around.
What will they be looking for?
An advisor who communicates with their clients on a regular basis. Someone who is reassuring and calming on the 1,600-point down day or the inevitable 3,000-point down day. Someone who has a track record of building portfolios that can successfully weather the storm. I do not suspect they will be looking for a robot.
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