In 2001, just after the horrific events of September 11th, as national sales manager I visited the offices of 60 advisors with the wholesalers I supervised. I asked each advisor whether they’d contacted their clients to comfort and reassure them in light of recent events. About 90 percent said they’d made no special contact, and almost all of them, as if reading from the same script, stated “I’ve prepared my clients for this kind of market volatility, so they’re fine.”
Fine? I don’t think so. Prepared? Their clients were about as prepared as I was when my widower husband proposed to me and reminded me that he came with two small children. “Are you prepared for this?” he said. “Yes, of course,” I responded — and I meant it — but the truth is that preparing for the unknown is impossible. I certainly wasn’t prepared for it to frequently take 30 minutes to get my kids out the door, including navigating the dreaded “sock bumps” in order to get their shoes on.
Well, sock bumps are nothing compared to stock bumps, and when it comes to dramatic national or global news, no matter how prepared your clients are, there is absolutely no substitute for personally getting in touch with them. Whenever there is a crisis, talk things through with your clients, give them a chance to ask questions and make sure they are on track not just financially, but more importantly, emotionally and psychologically.
On Bad Days, Calls Pay
This particular column was inspired by the events of the last week of February 2007, including the substantial market correction of Tuesday, February 27th. If you’re an advisor, did you increase your number of client contacts during and after this volatile week? If not, why not? A statistical review of a previous major market correction, the “Bloody Monday” of October 27, 1997, will be instructive here.
Russ Allan Prince, a senior managing principal at CEG Worldwide, conducted a survey of advisors and their actions following Bloody Monday. He found that only 18.3 percent of surveyed advisors contacted their affluent clients during this period. Of those who did make contact, 68.2 percent were given on average $260,000 of additional assets to manage. Those advisors who did not contact their clients following Black Monday gave the following reasons:
o Busy “putting out fires” (75.9 percent)
o Busy handling incoming calls (66.2 percent)
o Busy evaluating the market (61.7 percent)
o Too early to contact clients (45.6 percent)
o Fear of clients being upset (35.7 percent)
Of course, these aren’t really reasons, they’re excuses. Serious emergencies and acts of God that prevent advisors from contacting clients during volatile periods are few and far between. The real reason that most advisors — then and now — fail to contact clients during volatile periods is a combination of fear, ignorance or complacency. Advisors are fearful that their clients will blame them for losses, ignorant as to how important it is for clients to hear from them, complacent about making the necessary effort, or all of the above.