From the October 2009 Issue of Senior Market Advisor Magazine

You pride yourself on the fact that most of your clients had not lost a penny before March of 2009 and likely will have positive returns in 2009. Your hope is to maintain your client base. But you can do much more. You can grow your practice even during volatile times.

Are you diligent in making calls to your top tier clients? In past bear markets, you’ve learned the lesson that making frequent client calls is a great way to hand-hold your clients. In a Forester research study, advisors who talk to their clients at least once a month during volatile times lose fewer assets. But what should you say on those calls? Here are a few parts of a multi-step process to not only avoid losing clients and their assets, but also build your practice.

1. Bring your client back to the original financial plan and investment goals. One of my coaching clients records (with permission) each opening meeting, laying out the needs and desires of the client in preparation to create a financial plan. When making the monthly follow-up calls, he then uses the exact words the client stated in that meeting. “When we first met two years ago, you mentioned that your most important goals are having an income of $8,000 a month, making it last until you pass away as well as providing for your kids’ college expenses. Are these goals still important to you?”

Bringing your clients back to their original goals will assure them you are still in control and still on track to meet their goals.

2. Let your clients know that the markets and investments are set up to make a layman investor minimize return and possibly lose capital. In one University of Michigan study, if an investor missed the 40 best-performing days in the market from 1963 to 1993, the average return would have dropped from 12 percent to 7 percent. In the Journal of Economic Behavior and Organization, Richard Thaler wrote that more people make mistakes by not investing, rather than by investing in the wrong things.

There is also a high tendency for investors to avoid making changes to their portfolio despite good reasons for doing it. In one Boston University study, subjects were offered a choice of various investment products and expected returns. After making choices, the participants were informed some of the choices were already in their portfolio. Some 47 percent changed their mind and decided to stay with the products currently in their portfolio.
This is one of the reasons clients are often willing to ride an investment into ruin.