May 11, 2011

Spending More Time With Clients Helps Advisors De-Stress

Dispensing financial advice, it turns out, has quite a bit in common with firefighting and air traffic control: They’re all regularly cited as being among the most stressful occupations. Probably the biggest source of anxiety for a financial advisor is the potential for losing money for a client. Unfortunately, watching client accounts sink in value is exactly what happened to many advisors during the 2008 financial crisis, which many regard as the most stressful time of their career.

During the crisis, some financial advisors discovered that they were more shaken than their clients, letting their emotions overcome them and encountering difficulty in making the most basic business decisions or even picking up the phone. One financial psychologist told The Wall Street Journal that advisors who had personally lost money in the downturn were especially stressed, and that guilt and embarrassment were often the reasons why they did not want to deal with worried clients.

The latest AdvisorBenchmarking study—which was conducted about a year after the crisis—shows that financial advisors clearly understood the importance of communicating with clients in the depths of the crisis. It also indicates that financial advisors modified their behavior in an effort to reassure clients and answer questions, shifting to more personal communication methods, such as phone calls and in-person meetings, and cutting back on less-personal methods like email. For example, 83% of survey participants communicated to their clients over the phone in 2009, a lot more than the 51% of advisors who did so in 2008. In 2009, 76% of advisors used email for client communication, down from 84% the previous year.

Ways Advisors Communicate with Clients

Sometimes, the cause of stress for financial advisors isn’t the communication method, but the content of the communications. It may be more stressful for advisors to deliver difficult news or prod a change in behavior, since that may be viewed as personal criticism of a client or an invasion of the client’s privacy. A 2010 survey from Principal Financial Group found that, when advisors responded to clients about improving their financial situation, the advice they most frequently needed to give their clients was to pay down debt, save more for retirement and spend less money—sometimes a more difficult conversation than one about asset allocation or wealth transfer.

Stress can also be related to an advisor’s personality type, which can determine how they respond to what the market is doing. Every advisor can be an extrovert if the market is doing well. But if advisors react to market troubles with passivity or client avoidance, their level of stress is likely to be higher. Ditto for advisors who tie their value into how a client’s portfolio performs. Advisors with emotional discipline, who regularly reach out to clients to ensure they

keep a long-term investing perspective and understand the importance of a trusted advisor, may also find that stress is not an issue for them, regardless of what the market is doing.

How Advisors Can De-Stress

There are many ways advisors can manage the level of stress in their professional lives, converting negative energy into more productive behavior. Some ways to reduce stress include:

  • Spend more time with clients. A 2010 J. D. Power survey of financial advisor satisfaction showed that advisors are happiest when they can spend the most time with their clients. It doesn’t matter whetherit’s face-to-face or via the phone or email, but time with clients often lowers advisors’ stress. Advisors who make this a priority, particularly ahead of administrative duties, are often in a better position to strengthen relationships, receive more referrals and increase their asset flows. Don’t wait for your client to contact you. Take the initiative to reconnect if it’s been a while since the last conversation. The bumpier the market, the more important it is to reach out.
 
  • Get a coach. Financial psychologists say advisors who have a coach to share feelings with fare better both during and after a crisis. Coaching helps advisors take emotion out of a situation and regain a sense of control, and with their confidence restored, they’re in a better position to rebuild their clients’ confidence. Regardless of market conditions, it may help to have someone—a colleague, a family member, a health professional—who can provide honest feedback and supply an outlet for advisor worry or frustration.
 
  • Let it be. Admit it, many financial advisors are driven, ambitious types who always want to win. Also acknowledge that the more successful an advisor, the more stress he or she experiences. Sometimes, seeking to avoid anxiety-provoking situations induces stress all by itself.

    Keep stress under control by managing mood swings, which can become most pronounced when your self-image is under fire. Concentrate on disciplining emotions, learning to subjugate personal needs in favor of holding clients’ hands. Keep your role in perspective by making sure you don’t tie your self-worth into how well your clients or the markets are doing.

People are often defined by their relationship with money—how much they have, how much they make, how they spend it and how much they leave behind. No one is more intimate with a client’s financial life than an advisor, and that responsibility brings with it an unusual amount of stress. Helping manage other people’s investments can be exhilarating when clients’ assets gain value, but frightening when markets and clients’ emotions run rampant.

Wise advisors focus not just on the stress they’re feeling, but on the value of the guidance they’re providing, channeling the potentially negative energy that is an inseparable part of the job into more effective and rewarding client relationships.

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