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Financial Planning > Behavioral Finance

Crisis Management

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In 1973, when Henry Kissinger was secretary of state, he said: “Next week there can’t be any crisis. My schedule is already full.”

The time to begin planning for the next financial crisis is after the last one, and before the next one. Like it or not, you are the first responder to a financial crisis.

Your first-responder counterparts in the emergency services departments of your city do have a plan. When fire, hurricane, flood, earthquake or a terrorist strike, they know what to do.

Sadly, when the financial firestorm hit, from the president to the administration to Congress down to many financial advisors in the trenches, there was no plan. There was thrashing around, bills passed that no one read and millions of people froze in the headlights. So let’s get a plan for next time. Be ready.

Our own plan goes back to about 1998 when a sudden drop in the market caused clients (and many of their advisors) to freak out. Panic seemed like a bad thing. So I created the first of what I later called a “handholding letter.”

That first financial crisis plan was simple: “Here’s a letter. It puts things in perspective. Send it out.”

Between 1998 and 9/11, we had several opportunities to improve our crisis management strategy. When 9/11 struck, all of our systems were in place. Within an hour we posted a now-famous letter, “Terrorist Attacks,” which was sent to me by a client from Canada, Bob Cable. By that afternoon, thousands of letters, faxes and e-mails were out the door urging people, “Don’t panic. When the market reopens in a week, we’re not selling.”

Creating a Crisis PlanThe basic steps required are:o Predict what can happen.o Have a plan. o Educate your clients before it happens.o Execute the plan when the sirens go off.o Review and improve the plan.

You must predict what can happen. A very wise friend of mine once told me “Bill, the name of the game is not to predict the future. The name of the game is to predict which of several possible futures can occur and cover yourself on all of them.”

Besides dealing with one panic, you need a plan for the next one. You also need plans for other “futures” you predict. For instance, it would probably be a good idea to have an investment plan to deal with increased inflation following unprecedented worldwide government spending.

For each plan, you need a message. As the politicians put it, you need to “stay on message.”

The handholding messages I produce are based on research done at Dalbar, undoubtedly the top market research firm in financial services. Each year since 1984, Dalbar has produced a study called “Quantitative Analysis of Investor Behavior” (QAIB).

To quote from the 2008 study: “Investment return is far more dependent on investor behavior than on fund performance.” And from a presentation Dalbar prepared a couple of years ago: “QIAB shows that a huge value that advisors add is preventing investors from making wrong decisions in the future.”

What are those wrong decisions? Buying high and selling low.

We stay on message by reiterating: When you panic, you are selling low after buying high.

The plan is simple: To keep your clients from buying high and selling low, you must communicate with them. When there is bad or alarming news, investors need to hear from their advisor as quickly as possible. You have assumed the leadership role. When the leader is absent, fear dissolves into panic.

Take these steps:(1) Immediately get a handholding message out the door. Hopefully, you already have one “in the can,” compliance approved, ready to go.(2) Whoever is not working on the handholding message gets on the phone. You call. If you cannot reach the client, leave a message and tell them to check their e-mail, fax or mailbox. (3) The very minute calm takes over, mail the handholding message to prospects. Then get on the phone and call. When you get someone on the phone, you say, “We sent you the message headlined ‘Keep the Faith.’ Just one quick question: Has your advisor been in touch frequently to let you know what you should be doing?” (4) Educate. Before the next emergency, you must educate your clients on what can happen and what to do about it. The education must occur on every possible channel. (5) Now that you have made your predictions and developed a plan and have been educating your clients, when the hated red light flashes, you are ready to swing into action and execute.

When clients panic, your database is ready. You have already chased up all the e-mail and fax numbers. You have letterhead and envelopes on hand for those who don’t have or don’t frequently check their e-mail.

When the crisis has quieted down, you need to review.

I asked a good client, Rhonda Ferguson, CFP, from Columbus, Miss., for a review of her recent handholding. Here’s her analysis of how this plan went down:

“This is a rough count, but I think we’ve sent 21 handholding letters since July of 2007. E-mails really stepped up in September; probably half of those messages have been sent since September 1st. For a while we were sending a message weekly via e-mail, and then we did several daily e-mails. Then last week we did have a few unsubscribe, one even telling me to ‘stop the lectures.’ So I decided to back off somewhat. But not completely, because more people have told me to keep them coming, that they help and reassure them. My really long letter, ‘Keeping the Faith,’ was the only mailed letter. We called, ‘watch-for-it’ style … and told people it was the longest, most important letter I’d ever written, and that if they never read letters I send, to be sure and read this one. And then we called to see that they got it and that they read it.”

Besides the letters, the firm stepped up its phone calls as well.

“My Sales Assistant/Communications Manager (Mom) has been calling non-stop. We have a group that I never want to end up on the 90-day-no-call report … so she calls them every six weeks.

“With the downturn in the market, she stepped it up and made sure they were called monthly. The worse the news got, the more often she called, always with a script so she could reassure, then get off that call and on to another.

“In the worst part of the market crisis, she was looking to see who hadn’t been called in the last week. The responses to calls were that folks said they were nervous, but trusted us. Some said we’d educated them well and that we didn’t need to call them, but we called anyway, always because we want our message of reason to be what they were thinking, not Suze Orman’s or Jim Kramer’s crazy rantings, or Obama’s or McCain’s.

“Our volume of incoming calls has been normal. We have people saying that they know our phone is ringing off the hook, but we tell them no, because we are calling out, not waiting for people to call us.

There you have a solid financial crisis management strategy.

If you would like a handholding letter “in the can,” I’ve put one of our best at It’s available at no charge.

Bill Good is chairman of Bill Good Marketing Systems in Draper, Utah; see


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