January 20, 2009
“I have no idea what the stock market will do next month or six months from now. I do know that, over a period of time, the American economy will do very well and investors who own a piece of it will do well.”
Warren Buffet in an interview on CNBC on Friday, October 10
As an advisor, today you have two paramount goals – the first is to keep clients invested, the second
to keep them invested with you. Everything you do and say has to be framed with those two objectives in mind.
In the face of recent market chaos, I got an email from an advisor who had a meeting scheduled with his biggest client the next day.
“Over the past year, I’ve worked hard at communicating with this client, at calming his nerves and at keeping him focused on the longer term,” read the email. “My problem is that I’ve run out of things to say – and am concerned that my credibility will suffer if I simply recycle things I’ve talked about before.”
This is a legitimate concern. While there is virtue to consistency, we don’t want to sound like a broken record. A growing number of clients are tired of more of the same “stay the course” advice they’ve heard in the past.
Recently, I’ve had one on one conversations with some investors in their fifties and early sixties – to a person, these investors were struggling to assess the impact of the market downturn on their prospects for retirement. I asked for their reactions to a number of possible approaches that advisors could take in talking about today’s markets.
In a few cases, investors are simply angry and their emotional state is such that nothing we can say will help. And advisors looking for “silver bullets” that will remove concerns entirely will have to look elsewhere.
However, two approaches got good marks from many investors I talked to as being candid, providing new information and leaving them at least somewhat reassured – today covers one of those, taking a macro, top down stance.
The other “winning” approach focused on a bottom up, stock specific conversation, with I will discuss in a future article. (If you find these commentaries valuable and haven’t registered to get notification of new posts at www.getkeepclients.com, you may want to do so – so you won’t miss upcoming posts such as that one.
There are four components to today’s approach:
- Where appropriate, a personal update on where clients stand right now
- A conversation about the short term issues hanging over the market
- Putting today’s woes in perspective - including some fresh insights from a recent article in the Wall Street Journal
- A conversation about reasons for optimism in the mid-term
Part One: Start with a personal update
It’s human nature to look first at what developments such as the recent stock market turmoil mean to us individually. Until we’ve addressed their hot button issues, some investors won’t really pay attention to anything else we say.
For most of the clients I talked to, their number one question and also the biggest source of anxiety is the impact of the market collapse on their ability to follow through on their retirement plans. In many cases, you need to deal with this issue before you’ll get clients to look beyond the current situation.
As a result, in some instances an effective conversation needs to start with an update of the client’s financial situation and the implications of recent market events on hitting their long term goals. These conversations can be difficult for clients close to and in retirement, who don’t have time working for them to the same extent as younger clients. And they can be tough indeed with investors whose investments have been especially hard hit.
Just because a conversation is difficult, however, doesn’t mean you don’t need to have it. With some clients, you can skip this stage and go directly to a broader discussion of the environment in which we find ourselves – in other cases, however, this conversation is essential. And having that conversation, you may find that even though your client’s ability to retire when they want to has suffered, their fears will often be worse than the reality of their situation.Display article as PDF for printing.
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