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Market volatility provokes worry from investors. Advisors may be familiar with this: a client’s propensity to stray from the plan or sell at inopportune times. During times of uncertainty, advisors need to work with clients to keep them on track.
Collaborative technology is empowering advisors to not only ease client concerns but strengthen connections and improve client satisfaction. Research shows that client portal technology has a pronounced impact on advisor-client relationships.
Start deepening relationships by addressing clients’ financial anxiety
There’s one concept from the field of financial psychology that every advisor should understand during market uncertainty: loss aversion.
Loss aversion refers to having an emotional rather than logical response to a loss. It’s a phenomenon where the psychological pain of a loss is perceived as more severe than an equivalent gain. This is especially true for losses that are unexpected or cause an individual to feel threatened.
Clients may have a negative reaction during down markets. Of course, every client is different, but loss aversion is likely and because of this many clients may experience financial anxiety.
My firm, eMoney, has research1 showing that addressing a client’s financial anxiety is a powerful way to improve their satisfaction with your services. Those who strongly agreed that their advisor lessened their financial anxiety reported far higher levels of satisfaction.
Our research also showed that a client portal is the best technology for reducing a client’s financial anxiety. In fact, frequent portal usage kickstarts a technology benefit hierarchy. Client portal use leads to lessened financial anxiety. Reduced anxiety facilitates more trust with advisors, which leads to more loyalty. Greater trust and loyalty ultimately lead to improved satisfaction.2
While turbulent markets may provoke anxiety, they offer advisors an opportunity to connect with clients on a deeper level to strengthen the relationship.
Using client portal technology to collaborate with clients
A portal is a client’s way of always staying in touch with their financial picture. In addition to addressing clients’ financial anxiety, advisors can lean on this technology to take some key actions during market volatility to better collaborate with clients.
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Stay in constant communication. Let clients know that you understand the stress or anxiety they may be feeling, and that they’re not alone. Continuously direct them back to their portal where they can see for themselves that their goals and objectives may be on track – or if they’re not, be prepared to revisit the client’s goals and expectations.
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Continuously stress test your client’s plan. Routinely evaluate the resiliency of your client’s plan against a range of unexpected events. When markets do take a downturn, you can remind them that you've accounted for different stresses to their plan and redirect their focus back to the likelihood of reaching their long-term objectives rather than near-term turbulence.
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Provide perspective. A lot of worry about down markets is rooted in short-term outlooks. Give clients a new perspective by letting them see Monte Carlo scores in their portal. You can let them see how long their assets will last, or even give them a goal-funding view. Any or all these metrics will help clients focus on the long-term, big-picture elements of their plan and stress less about short-term market performance.
Deeper planning is key to more productive, long-term relationships
There are many things an advisor can do during volatile markets to work with clients, but having a strong advisor-client relationship before markets take a downturn prevents clients from acting on their own.
In a collaborative planning relationship, clients trust their advisor enough to share their values, motivations, and fears. They feel confident they’re getting the best possible advice for their unique circumstances and feel loyal enough to refer their advisor to their friends and family.
Research again shows that client portal technology is key to deepening planning relationships in this way.
This graph shows a significant lift in trust, loyalty, satisfaction, and the number of referrals given from clients who use their portal the most.1
This is because the most avid users of portals become highly engaged with their financial plan. They’re more likely to understand the ”why” behind their advisor’s recommendations and to see the value in them. This is especially important in uncertain markets – the trust and loyalty these clients feel for their advisor will help them stick to their plan and be less impacted by negative market events.
The client portal is a primary touchpoint in the planning process. As such, it lends itself well to the incorporation of financial psychology tactics. Our research explored the intersection of fintech and finpsych and found that advisors who embrace both approaches – representing only 17% of all advisors – saw drastically improved client outcomes across the same key metrics.
A collaborative approach involves both technology and financial psychology to take the planning relationship deeper. These types of relationships revolve around a client’s innermost truths, desires, and worries, and will be the most resilient when bear markets inevitably come.
A collaborative approach to market volatility
A volatile market may make clients wary of what the future brings. In uncertain times, advisor-client collaboration is more important than ever, so address clients’ financial anxiety, use client portals to work together, and establish deeper planning relationships.
With the right use of technology, and even financial psychology, advisors can turn market volatility into an opportunity to make relationships stronger than ever.
Joshua Belfiore is manager, group product management, for eMoney Advisor.
1 eMoney Beyond the Plan Research, July 2023, n=504 advisors, n=1,003 end-client investors
2 eMoney and Financial Planning Association, The Transformative Power of Technology on Client Relationships, September 2023
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
