Times of financial downturns and tottering financial titans are times when advisors need to maintain a reassuring manner without seeming blas?, experts advise.
The principle was driven home during the week of Sept. 21 with the bankruptcy of Lehman Bros. and the near financial catastrophe suffered by Merrill Lynch and AIG, both in New York.
Both Merrill and AIG avoided bankruptcy filings: Merrill by agreeing to be acquired by Bank of America, and AIG by federal intervention in the form of an $85 billion loan. Lehman is in negotiations to sell large parts of its business to Barclays.
Barbara Sullivan, managing partner of Sullivan & Company, New York, a marketing communications firm that works with financial service companies, stresses the need to keep in touch with clients during periods of turbulence.
“Financial services companies should not wait for their clients to call,” she says.
Instead, reach out to reassure them that their company is sound and their money is secure, she advises.
“Be concrete and suggest what clients should do now with their investments,” she adds. Among points to make, Sullivan recommends:
Remind clients about the importance of diversification.
Help them put investment performance into perspective and think long term.
Be positive, underscoring the safety of their assets being managed, despite market risk.
Robert Cusick, president of Investment Insight Ltd., Cortlandt Manor, N.Y., also believes staying in touch with clients in times of financial turmoil is vital.
Cusick says his company regularly e-mails a newsletter to clients. Sending special notes commenting on troublesome developments is an effective way to maintain their confidence, he notes.
In one recent message to clients, Cusick wrote, “While even our well diversified portfolios have slipped a bit this year, we have been preparing for this exact scenario.”
It was not realistic to expect the big run-up in stock prices from 2003 to 2007 could continue, he added.
“There is always a price to pay for excess anything,” he stated. “Think of it as a market ‘hangover.’ It is time for a serious pullback. It is OK. It is normal. It is actually healthy.”
Last week, amidst the turmoil surrounding AIG, Lehman Brothers and Merrill Lynch, Cusick told clients, “The radical actions of the past week appear to offer a welcome turning point, a ‘bottom’ from which we can begin a rebuilding process.”