Dow Down

Financial markets will experience downturns. It’s inevitable. And whether there’s a one-day selloff or multi-quarter recession, market declines become a huge headache for advisors as they’re besieged by calls from concerned clients. You’ve probably been there as an advisor, trying to explain to a worried or frustrated client why they don’t need to panic. You’ll remind them of the long-term strategy that you put in place, but they still urge you to sell. It can be a never-ending battle.

Last December, as the S&P 500 dropped nearly 300 points during the week and a half leading up to Christmas and wiped out gains for the year, I was struck by the contrast between utilizing a turnkey asset management platform (TAMP) to its full potential versus only partly leveraging the technology, or not using one at all. At the time, I was in the car with an advisor who avidly used a TAMP and we were on the way to see one of his clients.

As we listened to news about the market’s steep decline, I asked if he needed to get back to the office or call other clients. He said, “Not at all, we’ve planned for this and spent a lot of time laying the groundwork with our clients. We use the TAMP-provided marketing materials to educate them, so they know to expect market volatility and maintain a long-term perspective. I’ll certainly take the call if someone wants to reach me, but there’s no reason for them to be concerned.”

Building a Foundation

As confident and secure as that advisor felt, I also fielded a couple of calls during that drive from other advisors who were worried and asking what they should do. This dichotomy illustrated an important point. While outsourcing to a TAMP enables you to be more responsive during turbulent time periods, if needed, it’s still important to leverage the platform’s full scope of resources, as well as the multitude of dedicated professionals behind that technology.

TAMPs are more than just a dashboard of client portfolio breakdowns. You can help clients build a solid financial education by utilizing the extensive collateral and talking points that a TAMP provides to advisors, as well as the portal that it offers for third-party strategists to provide marketing information and fund fact sheets. So if you currently use several different money managers, as many advisors do, a TAMP could become your single repository of information with abundant useful and educational content that clients can turn to.

3 Types of Advisors

Generally speaking, I believe there are three types of advisors when it comes to TAMP usage:

  • The first advisor uses the TAMP optimally, laying a foundation to train their clients that market volatility is inevitable. In doing so, they maximize the effectiveness of the resources provided and streamline their services and time. This advisor also leverages dislocations for the benefit of clients through tax-loss harvesting technology that can be provided with the click of a button.
  • The second type of advisor uses a TAMP, but has either not tried to lay groundwork with clients or has nervous clients who need reassurance during a downturn no matter how much coaching they’ve received. The extensive discussion materials and scripts that a TAMP provides can also help alleviate client fears during these scenarios, because the advisor’s message will have the backing of a team of astute investment professionals.
  • The third advisor doesn’t use a TAMP at all and rather acts as their own portfolio manager. When the market experiences a dislocation, this advisor will often need to choose between focusing on reallocating portfolios or trying to reassure clients. They may want to do both but are burdened by time constraints. The result is often long, harried days in the office managing all kinds of crises and trying to put out different fires. Why? Because this advisor has chosen to oversee all client investments, rather than take advantage of trusted technology and expert information to help educate and prepare their clients.

Turning a Negative Into a Positive

Dislocations are naturally considered negative events, like last December’s selloff, but technology can turn a negative into a positive. While marketing collateral and coordinating account reallocation are certainly helpful measures, a TAMP can also potentially help make the most of days when markets are in the red.

This is because TAMPs that offer advanced tax management software allow advisors to treat dislocations as tax-loss harvesting opportunities. The advisor would just need to work with their TAMP ahead of time to set up the right types of accounts for clients. Executing the trades then becomes quick and easy when the opportunity presents itself.

So if a concerned client calls to say the markets are plummeting and they don’t know what to do, the advisor could respond, “Hey, this dislocation has actually worked out great for you. We were able to maintain your strategic allocation and harvest thousands of dollars in tax losses. At the end of this year, we will have significantly reduced the tax dollars you owe.”

Time to Talk With a TAMP?

In 2019, we’ve experienced 15 days where the S&P 500 declined at least 1%. These 1% days can be enough to trigger even reasonable clients. How much longer do you want to deal with frantic client calls and the need for urgent asset reallocation? How many more bad days can you endure before deciding the best course of action is to invest in your practice through a top-tier TAMP?

Every one of those days represents a lost opportunity to build your business because you can’t focus on attracting new clients. Rather than submitting to this damaging drain on resources, align with a TAMP and get back the time you need to fulfill the true potential of your practice.


Ryan Beach is the chief operating officer of Orion Advisor Solutions.