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August 11, 2002 at 08:00 PM
What To Do When Clients Say Yank It
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In a down market, it can be a registered reps worst nightmare.
The “it” is the moment a client phones in, or drops by, and announces angrily: “I dont care about your asset allocating or your automatic rebalancing or your long term planning. I dont care about anything youve been telling me about goals, time horizon, and needs. I want out of the market! Yank my equity investments now!”
Is it happening? You bet. Many reps, insurance company executives, and mutual fund officials have been telling National Underwriter such calls are not infrequent these days. With stock market indexes see-sawing in triple digits on a daily basis, they say, customers–even long-term investors–are dialing in with the idea of bailing out. A number of people known to this writer–sober citizens all–say they, too, have been looking at the exit sign.
What is a rep to do? First, remember that a lot of the callers are really talking from “emotion, distrust and anger,” says Jennifer Renner, a registered rep who works in the Personal Delivery area of American Century Investments, Kansas City, Mo.
In response, she says she acknowledges the feelings and also points out that “we are also angry, frustrated and scared.”
Sometimes that alone is enough to calm the person, she says. “The person has vented, gotten the feelings out, and been heard.”
Many people in a down market tend to feel “incredibly alone,” points out Stephen Gresham, executive vice president and chief sales and marketing officer at Phoenix Investment Partners Ltd., a subsidiary of The Phoenix Companies, Hartford, Conn.
“When the market is up, its a party and everyone wants to join. But when its down as it is today, the party is over and people feel fear, despair, and worn down.”
This is the very time when people should be talking to their financial advisors, he says. Unfortunately, many high net worth people polled in the 2002 Phoenix Wealth Management Survey indicated their financial advisors arent communicating with them enough, he says.
The advisors dont have to take responsibility for what has happened in the market or a persons portfolio, Gresham says, noting that “our survey shows most clients are not transferring blame for the downturn to their advisors.” But the advisor “does need to take responsibility for working on a recovery plan with the client,” he says.
To do that, he suggests advisors “start by sharing emotional space with their clients. They should orient themselves appropriately to where the person is coming from right now.
“Remember this is a person who has suffered a loss.”
If the person is receptive to the emotional sharing, that is the time to try redirecting to a more rational discussion, suggests Renner. “For instance, ask the client to tell more about their current situation. Say, What has changed? Do you need the money now?”
The answers might suggest a change in asset allocation is in order, she says. “If so, try suggesting that the client consider doing that first.”
If the client rejects that idea or says he or she still wants out of the market, try discussing alternatives, Renner continues.
“Perhaps ask, Do you ever plan to go back into stocks? If the answer is yes, suggest the client leave some of his or her money where its currently invested. Suggest taking out only some of the money–so the client will be in the market when it goes back up again.”
If the client does not like that idea either, “try asking how he or she plans to keep up with the pace of inflation, and how the person will know when its time to get back in the market,” Renner continues.
The point, she says, is to stay focused on rational solutions, ones related to the clients current goals, needs and risk tolerance. “Take the emotion out of looking at returns–the wow of the great returns and the panic at the falling returns.”
Thats tricky to do without discounting client feelings, but she says it can be done.
It helps to emphasize that “Im not here to stop you from doing this,” she adds. “But raise the possibility that maybe the client might instead want to consider scaling back,” if it’s in the clients best interests.
