Everyone has a favorite film. They have seen it many times. They know how it will end. Every time they see it, they notice a new detail because they are focusing on a different aspect of the movie. The stock market can be like that. As an experienced advisor, you know the stock market is cyclical. You have confidence, like the film, things will work out in the end.
Clients are not stock market professionals. They might not have seen a down market before. Do the math: Let’s assume an 18 year old might be interested in the stock market. If they saw the 2008 Gret Recession at age 18, they might have been born in 1990. That would make them 36 years old today. Put another way, an investor below age 35 might never have seen a down market. Now they have one unfolding before them, at least in the short term.
They are scared. They have not heard the four most dangerous words on Wall Street are “This time it’s different.” Assuming they still get account statements in print, they will arrive at the beginning of the next month.
As an FYI, the bombing in the Middle East started on Saturday, February 28th. The stock market was closed after the trading week ended and statement values closed for the month of February. Although people can check account values online anytime they choose, the month end statements won’t be available for another couple of weeks.
I was in production at the time of the Crash of 1987. Our manager walked around the bullpen where all us advisors were seated and told us, “Every client needs to be called.”
When the stock market is going through a period of turmoil (volatility) here are several reasons where every client needs to hear from you.
1. They need to know you are paying attention. Online trading can be ideal for the self-directed investor. Your clients have consciously chosen to work with a live advisor. This is costing them more. They have no idea how many clients you have. They might think it’s 10,000 and they are just another number. They need to know you are thinking about them and know they are concerned.
2. They are scared. They might be one of those under 36-year-olds who have never seen a market pullback before. They might have started investing much later in life. Even if they have invested before, they may be thinking “This time it’s different.” No one will say “I need hand holding” but many investors do. When you call them that is hand holding.
3. How am I doing? They see what is going on by watching the financial news channels. They know they can view their account online. They might be afraid. They are concerned about how the market decline affects them. They will ask how they are doing. You need to tell them.
4. You feel their pain. There might be times when an investor thinks advisors are like friendly croupiers in a casino They smile and chat, but don’t have any emotional connection to you losing money. Your clients need to understand you are invested in the stock market too. If they are losing money, the chances are good you are losing money too.
5. No frame of reference. Those newer investors don’t know the stock market recovered after 1987. It recovered after 2008. There are no guarantees about the future, but history has delivered positive outcomes before. If you were in the business at the time of a previous decline, you can share firsthand information.
6. Other sources are giving worst case scenarios. Watch the TV news yourself when you are not in the office. When commentators report, the market does not decline, it plunges. They might highlight the lowest point it reached that day, only casually mentioning it closed above its lows. You need to give a more balanced assessment of the situation. Use a calm voice.
7. What is the firm thinking? This is one of the reasons they are your client. You have a research department behind you. Lean on them. What are they thinking? Your client likely acknowledges them as experts.
8. Don’t minimize the market action. It is easy to say, “this is no big deal, it’s just market volatility.” This implies the client is being irrational or emotional and they are at fault. Don’t say: “The market was overextended. It needed to pull back 5% or so. If it wasn’t this crisis, it would have been another.” They will wonder if you expected this to happen, why you didn’t get them onto the sidelines.
9. Why is this happening? The answer might seem obvious. You are an industry professional backed by plenty of industry professionals. Your client is not in the same category. They might understand some points but not others. Explain how the stone dropped in the pond creates ripples and try to explain what is going on using real life examples.
10. They want direction. It might be as simple as “Stay the course.” You might be more proactive using If/Then statements. “If “x” happens then we should do “y.” They want to feel you have a strategy. You are not a deer in the headlights.
Clients will feel better when they hear from you. They might still be scared, but you will have provided reassurance.