Crisis Management for Existing Clients

by Ryan W. Smith

One of the aspects of investing that has scared many investors, both experienced and new, from the markets in recent years are the severe downturns seen in the past few decades. The large, swift crashes or corrections like those seen in 2000, 2008 and earlier this year, the Flash Crash or Black Monday in 1987. Those episodes, which garner much broader media coverage than even Wall Street’s recent record highs, have been referred to time and again by those individuals who do not invest in the markers as the primary reason they are not investing. They just can’t handle the risk.

But what about current clients? They too are averse to risk, as much as anyone else, but oftentimes active investors have more knowledge, or at least a willingness to learn, than a novice. Even then it is imperative for prudent financial advisors to develop a plan for client retention when the going gets so tough that even current clients are beginning to look for the exits. In other words, financial advisors should develop a plan, a financial fire drill.

A tried and true method of working with, and retaining, current clients in the event of an economic crisis impacting the markets is to communicate consistently. Regular updates on the state of the crisis, how it has impacted the client’s portfolio, what is being done to mitigate the losses and the beginnings of future plans to regain footing once the crisis has passed are all vital to client retention.

Analysts often mention how the most successful financial advisors have a series of basic letters, each one easily customized for a particular client, which can serve as templates in both email and letter form. These can be sent often throughout the episode. One interesting note is that many advisors do not appear to shy away from longer letters or emails during a market crisis. Some advisors believe that a longer letter, given that its recipient is already interested in the content, will get more people to read at least some of it. For emails, however, many advisors feel that shorter can be better, with references in their emails to other communications like letters, meetings, seminars and phone calls having the most overall impact.

If particularly alarming news hits, prudent advisors often say to print a list of all clients with phone numbers and start calling. It is ok to leave messages so long as the advisor feels confident those messages are reaching the client. Phone calls, even voice mails, feel more personal to most clients in today’s smartphone, text-based world.

Additionally, some advisors mention that downturns are a good time to reach prospects who have previously shown interest in investing but never signed on fully. The main reason given for this successful recruitment is that by projecting a calm demeanor in bad times, an advisor might gain some clients who want a steady hand in a storm. The thinking is that people are more willing to sail a ship into a storm if they have confidence in the captain.

Confidence is also key to client retention in difficult times, along with consistent communications. If clients are concerned about a plethora of bad news in the media, information they are certain is impacting their accounts negatively, then they will seek out the answers they feel necessary to find. This is why consistent, reassuring communications are necessary. Not just one letter, regular letters. Not just one call, consistent updates. Many advisors are quick to say that these are not daily updates, however. Clients should not feel inundated.

Financial advisors, in general but especially for their current clients, are economic thought leaders. They are often viewed as experts in a field filled with uncertainty, hyperbole and misinformation. No matter what is occurring in the market, someone somewhere feels that the sky is falling or that the goose laying the golden egg will never stop.

Successful financial advisors are able to navigate the storms with calm and make the most of the tranquility between. One of the ways they are able to do this is by communicating regularly with their existing clients in difficult times. No business can remain successful without providing excellent customer service for clients already paying for the service. Financial advising is no different.

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