The current economic landscape has left many individuals feeling concerned or worried about their investments and the overall economy. Understandably, this has led to a stressful atmosphere in the US and Canada, putting financial advisors in a tough position when delivering less-than-optimistic news. In such a climate, a financial advisor's ability to proactively address and resolve clients' concerns becomes crucial.
David DeVoe, of a San Francisco-based financial services consulting firm, writes, "Today’s crisis of confidence in the U.S. banking system is yet another opportunity for advisors to demonstrate the power of the independent model." He adds that advisors who serve their clients well during this time and engage appropriately will be rewarded with a growth surge following the crisis.
To better support clients during these challenging economic times, financial advisors should:
- Adopt a mindset that welcomes change: Numerous societal shifts and technological advancements are redefining the economy, making adaptation essential for success. Factors such as war and reconstruction in Ukraine, younger generations becoming the dominant economic force in the United States, accelerating artificial intelligence, climate-related changes, and a growing global population all contribute to this change.For example, just because something worked well before doesn't mean it will work again – here's popular belief turned on its side: According to Professors Jason D. Fink and Kristin E. Fink from James Madison University, "Since 2005, return correlation between the Bloomberg Commodities Index and the S&P 500 has been 49 percent, compared to –30 percent 1973–2004. This change has significantly reduced the ability of commodities to contribute to an efficient portfolio in a modern portfolio theory framework."
- Become an expert communicator: Effective communication goes beyond merely answering questions and making phone calls; it involves actively listening to investors' needs and concerns. Pat Hehir, a partner at Princeton Financial Partners, uses CircleBlack to review assets, identify clients who may need proactive outreach, and track which clients have been logging into the firm's branded app. By leveraging technology and software integrations, such as Riskalyze, MoneyGuide, and Redtail, advisors can maintain an integrated view of clients' needs and foster greater collaboration within the firm.
- Be ready to meet the conversational moment: Ensuring key data is readily available and easily accessible enables advisors to effectively address client questions. Kevin Andrews, founder at Eagle Financial Group, says, "I feel like we’re counselors or psychologists most days... There’s so much data in our world, and our clients expect us to know every detail." Andrews uses a financial advisory platform as the centerpiece for client meetings, creating a shared view before addressing specific concerns.
- Embrace your role as an educator: During times of economic confusion or volatility, clients seek guidance from trustworthy experts. As a financial professional, your expertise serves as a grounding force. Encourage clients to adopt a proactive stance by sharing relevant market trends, timely legislative updates, clear investment strategies, and methodologies. It is crucial to manage expectations, as nobody can predict the future performance of an investment.
Some steps to provide guidance and manage expectations include:
- Sharing market trends relevant to clients' portfolios
- Communicating legislative updates promptly
- Preparing and sending reports before clients request them
- Addressing issues before clients notice potential problems
- Demonstrating awareness of the overall economy
- Clearly articulating investment strategies and methodologies
In conclusion, by adapting to changing economic conditions, communicating effectively, being prepared to engage in meaningful conversations, and serving as educators, financial advisors can better support their clients through turbulent times. Embracing these roles will not only help clients navigate uncertainty but also foster long-lasting relationships and build trust.
1 Adapted from source: "How RIAs Can Better Support Clients Through Bumpy Economic Times | CircleBlack." 8 Apr. 2023, www.circleblack.com/how-rias-can-better-support-clients-through-bumpy-economic-times.