A young financial planner at one of my client firms sent an e-mail to his employer, saying that he was concerned about the growing volume of client work, and the effect of current market volatility on client portfolios. He felt he was getting burned out, and the only solution he could think of to suggest was that he needed higher compensation.
Naturally, my client passed the e-mail on to me, along with a request for a helpful solution. (One of the perks of being a consultant is that you get to handle the messes that nobody else wants to deal with.) My response was that obviously more money wasn’t going to solve the employee’s problem, because the problem was the owner/advisor herself.
Many advisors believe that down markets don’t affect their practices. In my experience, that’s just horse hockey. Last month, I wrote about how down markets usually drive a flood of new clients to independent practices, along with a flood of new client work. But that’s only the tip of the globally warming iceberg. Down markets adversely affect even the best advisory practices (especially their staffs) in many ways. And advisors who fail to recognize and address them, usually suffer a down market’s most common result–staff turnover.
When the markets go down, everyone gets a little unsettled. Firms tend to get a flood of requests and inquiries from their existing clients, which are mostly nervous cries for a little handholding. Many advisors recognize this for what it is, and increase their client communications. It’s a good solution, but it also in turn increases the staff’s workload. At the same time, portfolio performance usually goes down, along with firm revenues, at least for a while. And that can be unsettling to employees, especially those who haven’t lived through a down market before. I find it ironic that most advisors are very good at holding their clients’ hands during troubling times, but fail to recognize the same need for handholding in their employees.
In fact, if anything, many advisors tend to make the situation worse. It’s human nature to react to difficulties that are out of our control (a bear stock market for instance), by focusing on things that are in our control. With financial advisors, that often translates into micro-managing their employees, placing them under increased scrutiny, holding them to higher (and sometimes unreasonable) standards, and concern about petty issues that six months ago, they couldn’t have cared less about. One of my clients was considering firing an employee over their messy desk–the same messy desk that the employee has had for the past five years.
Remember, Nothing Lasts Forever
It’s important for senior advisors to remember three things about down markets: If you’ve never gone through one, it can be very unnerving, to say the least; the workload for employees will definitely increase; and the combination of those two factors can derail even the best of firms. Here’s how I advise my clients to help their employees and junior professionals through tough times, and position their firms to take advantage of the new clients that will undoubtedly be headed your way:
Get hold of yourself. They tell ER physicians that in emergency situations, they should take their own pulse first. Once you’re calm, then you’re in a position to calm those around you, and get them to perform at their best, even in tough situations. Most likely, you’ve been through this before, you know what to expect, and that down financial markets are always accompanied by hysteria (fueled by an often irresponsible media) that makes things seem much worse than they really are. Even though we all know that markets move in cycles, collectively we seem driven to believe that bull markets will last forever, and bear markets will be the ruin of us all (that, of course, is why people need independent advisors).
Now’s Not the Time to Do Something Stupid
So remind yourself that while portfolio performance may be off for awhile, and firm revenues may even go down, it’s not the result of anything you or your staff has done wrong. It’s just the nature of markets, and you’re here to keep your clients from doing anything dumb exactly at times like these.