Taking Stock: Things to Do When the Markets Misbehave

Just when it looked like the stock market might be turning the corner, oil prices spiked, throwing airlines and many other sectors into a tailspin again. But as I've been saying for the past few months, down markets are the time when successful independent advisory firms hit their highest growth rates, in terms of new clients, and often even assets under management. It sure looks like those "good times" will continue to roll for some time to come.

Of course, all firms don't grow during such tough times: some actually lose clients, but more often, advisors just don't add many new ones, while their existing AUM fall with the bear markets, taking firm revenues with them. If your practice falls into one of these categories, in which your new client growth hasn't accelerated in the past three months or so, it's now time to ask yourself why, and get your firm on track to capture your share of breakaway clients.

Those are investors who broke with their brokers and advisors who failed to properly structure their portfolios, leaving them unprepared for the inevitable market downturn we're now experiencing. Here are some places to start:

Compensation: Are you a fee-only firm, or at least derive the majority of your client revenues from fees? Perhaps the primary differentiator between brokers and professional advisors is fee compensation paid directly by the client (or directly out of client accounts), and the number of potential clients who are becoming aware of the difference and what it really means to continue to grow. Of course, brokerage firms have come out with their "fee" programs, but they still don't seem to have it quite right. When folks start looking for a "better way" to get advice, increasingly fees are what they are looking for.

Staffing: Do you currently have the people power to follow up on all the qualified referrals you get today? If yours is like many advisory firms, you and your partners (if you have any) have their hands full servicing your current clients. So you rarely take the time to follow up on all or even most of the opportunities you already have. The solution: You can decide to stay at your current size (a good decision for many advisors) or you can add some staff--first clerical, and then professional--to give yourself more time and energy to take better advantage of that opportunity while it's still knocking.

Reprints Discuss this story
This is where the comments go.