Political discussions can be difficult — if not impossible — for advisors to avoid.
“It’s fair for clients to wonder how changes in Washington, D.C., or state governments might potentially affect their portfolios, especially amid midterm elections this year,” Capital Group said in recent commentary. “Some may expect you to help them understand if any adjustments are needed, so it’s best to be prepared.” According to Mike Joslin, CEO of Joslin Capital Advisors, clients — including high-net-worth clients — routinely ask him about political matters.
“You have to address it,” Joslin said in the commentary. “To not address something that is so obvious is to ignore the elephant in the room, and I think that makes it even a more awkward moment.”
Capital Group released four tips from Joslin and two other registered investment advisors on the best techniques when talking to clients about politics.
1. Don’t bring up politics — wait and see if the clients do it first.
Capital Group talked to Bob Smith, market leader and partner of the Cleveland office of HPM Partners, whose advice is to not go there unless clients take you there.
Smith is civically active. He has been appointed to several positions by elected officials, including the Ohio Public Employees Retirement System, and serves as the current chair of the Detroit Police and Fire Retirement System Investment Committee. However, while his clients are aware that he is active civically, Smith doesn’t bring up politics before being asked.
“If clients want to ask that question, that’s theirs and we will answer it based on our perspective and how politics, government and public officials affect public markets,” he says.
2. Be prepared with a response.
Because Joslin’s clients tend to ask about politics frequently, he told Capital Group that he likes to stay one step ahead.
When the clients start asking about an election or other event, Joslin writes and emails articles on major political events.
For example, many clients expressed concern with the United Kingdom’s decision to leave the European Union because many of the firm’s clients have significant weightings to international stocks.
Joslin had a newsletter in clients’ inboxes just days after the vote.
“The Brexit (email) was probably the one that got the most kudos because we got it out just days after that happened,” he told Capital Group. “That was worrying clients.”
3. Focus on opportunities presented by long-term policy.
Miles Stackpool, business development analyst at Boulevard Family Wealth, advises to focus on real financial policy shifts that can create opportunities for clients.
He told Capital Group that he sees questions about politics as an opening to show what really matters.
When clients ask about politics, “you use it as a segue,” Stackpool told Capital Group. “You segue to the things they should be thinking about such as long-term tax planning and long-term estate planning.”
For example, the sweeping tax reform enacted in 2017 dramatically increased wealth transfer exemptions. According to Stackpool, this presents a whole host of planning opportunities.
4. Stay neutral.
Smith, Joslin and Stackpool all agree that advisors should stay neutral while talking with clients.
Smith’s advice is to keep personal political opinions to oneself and stay focused on the client’s goals.
“You want to rephrase (clients’) questions to around the current news coming out of D.C., especially how it affects capital markets and how it might affect their portfolio,” he told Capital Group. “You don’t have to show your politics.”
According to Joslin, taking sides brings with it a “great risk with a high percentage of clients.” He says that’s true especially with high-net-worth clients who “probe far more frequently to see if you are well-read and informed about issues (political or otherwise), and that you can clearly articulate the opinions and positions you hold.”