Written by: Souki Fournier
Amid the COVID-19 pandemic, financial advisors amongst other professionals are facing new challenges in the way they manage their clients’ investments and communicate with them. It is no secret that no matter how many financial crises we have gone through in the past, these are uncharted territories that we are all learning to navigate. As a financial advisor, it is your responsibility to consistently communicate with your investors and reassure them that you do have a plan.
Choosing who to trust to manage their wealth is one of the most important financial decisions your clients will ever make, and now more than ever is the time for you to show them the value you are bringing, and how much of a quantifiable impact your expertise has on their financial success. If you haven’t already, you can soon expect to receive wary phone calls from your clients seeking reassurance about their investments. These are the 4 critical questions you need to be ready to answer:
1. Am I going to be okay?
At this time, what your investors need more than anything is reassurance. It is hard not to worry about the impact of this market downturn on their financial future, and the only person they can turn to for guidance is you. Your role is not only to develop an investment strategy designed to meet their goals, but it is also managing their expectations during market volatility. Financial DNA can predict which clients are the most fearful and how to communicate with them, we call this Market Mood.
2. Do we have an alternative financial plan?
This right here is what makes all the difference between many brokers and financial advisors. Your number one responsibility is to put your clients and their money first. Your expertise is used to its full potential in times like these when it is a matter of speculating what comes next, and what is the right move for their investments. This is an inevitable conversation that you are bound to have with your investors, and the key here is to identify every client’s unique set of communication patterns and comfort zones, and approach this conversation with those insights in mind. You see, every behavior drives a specific fear, that you need to unravel and address.
For example, if your client’s behavioral type happens to be Strategist (one of the ten unique styles of Financial DNA), the most effective way to approach this conversation is by having a quick phone or Zoom call, where you reassure your client and reinforce the fact that the volatility of the market will not derail achieving their goals, and provide a clear plan for how this is actually an advantage.
3. What steps are you taking to proactively anticipate change and new opportunities that are right for me?
Some clients (particularly those that have a higher risk profile) will react to the current market events with an opportunistic eye. For these clients, they are interested in the strategy and opportunity that they can take advantage of with the current market. We coach advisors to identify these clients with this Market Mood and use this as an opportunity to increase their AUM.
The truth is, this question is not necessarily tied to times of crisis. The very purpose of a financial advisor is to constantly anticipate changes in the market, and identify new opportunities for their investors. The COVID-19 pandemic-induced market instability is no exception. What your investors are really asking is “How much should I expect to lose?” and “Is this a buying opportunity?”
The key here is to re-address their risk tolerance. Financial DNA advisors do this by re-focusing clients back to their Financial DNA results. The results don’t change when the market changes, allow your client’s financial behavior, behavioral biases, and risk measurement to drive this discussion.
A good resource to learn more about the notion of Behavioral Biases is our extensive study of Predicting Behavioral Biases with Behavioral Finance.
4. Is my portfolio designed to match my risk tolerance?
Generally speaking, when identifying a person’s behavioral tendencies, you can predict how they will react to any given situation. Whether they are experiencing great success or under a great deal of pressure, using behavioral insights, you can always anticipate what their instinctual reaction will be.
Your clients’ behavioral tendencies do not change or fluctuate over time, neither will their reactions at their most stressed point. So when a global financial crisis occurs, you should not only be able to anticipate their reactions, but you should also be prepared to address their concerns in a way that aligns with their unique set of communication patterns.
Related: How Advisors Can Bump up Their Intuition for Online Client Meetings