Boomer Market Advisor

Six standards of client communication in a downturn

Communication is one of the simplest, yet most powerful tools advisors have to strengthen and grow their relationships with clients, especially during turbulent times. But a monthly statement or a phone call here and there isn’t enough to build the kind of client relationship that will endure challenging markets. Instead, advisors need to develop meaningful ways to connect with clients and make communication a priority — in good times and in bad.

Because research shows that how you communicate is just as important as what you’re saying, even the truest, most sensible messages can fall on deaf ears if they’re ill-timed and ill-delivered. The following are a few things that are critical to communicating with clients effectively:

1. Focus on goals. When it comes to investments, performance is important, but what really resonates with clients is how investments impact their goals and needs. Frequent communication (and re-evaluation when necessary) about clients’ goals will help drive productive discussions and diminish impulsive urges clients may have. In the end, it’ll force your client to realize what’s really important instead of succumbing to the paranoia of market chatter. We’re hearing from advisors that the last few months have been an opportune time to discuss and reevaluate clients’ goals, time horizon and risk tolerance. By focusing on the full wealth picture, negative performance numbers of the last year aren’t the only thing clients focused on.

2. Proactivity is key. Whether they come from the media, the web or the water cooler, all of the economic and financial predictions and media hype swirling around are enough to worry any investor. To be a trusted advisor in this environment means you need to communicate with clients regularly and proactively so the rumor mill doesn’t get to them first. Even if your client’s not the type to panic, demonstrating that you’ve always got their business top of mind can help keep your relationship on solid ground. To make this a more manageable part of the process, most successful advisors have a year-long communications calendar with topics, dates, formats and responsibilities.

3. Variety is the spice of life. With technology options today, consumers want to consume information in different ways, so explore multiple formats for communication. We recently helped advisors create videotaped commentaries, featuring the advisor discussing trends in the financial markets. The video lives on a website or can be blasted out to an entire client and prospect base by email. Another great tactic is hosting a breakfast/lunch/late day seminar with clients to discuss what’s going on in the markets. It provides a relaxed setting in which clients can interact with you and others like them about big picture issues they’re facing.

4. Speak their language, not yours. Sure, clients want to know their advisor is an industry expert, but complex market scenarios can be too complicated for even the most sophisticated investor to grasp. Be mindful of striking a balance between educating clients about what’s influencing economic trends and — more importantly — how it impacts them directly. Avoid conversations that are laden with industry jargon and speak in common terms.

5. Get real(istic). Everyone from Wall Street to Main Street has a prediction about when the markets will rebound, and odds are, your clients are wondering who is right. While it’s tough to predict the future with any certainty, with constant communication, you can reassure them you’re keeping a close eye on their options. Avoid focusing on when the market will recover and focus on their full financial picture, addressing more immediate needs like cash flow for the next two years and other shorter-term planning items.

6. Know the facts. In addition to understanding current trends and industry opinions, knowing the historic cycles of the markets can ease some of the uncertainty clients have about the future. While you won’t be able to predict when this latest downturn will end, you can provide some comfort in explaining what’s happened before. Doing so will also emphasize your experience, demonstrate that your perspective extends well beyond the walls of your office, and ultimately reinforce trust.

Your words won’t make the current economic crisis turn around … but they might help reassure your clients until it does. Take time to develop a communications plan that works for you and for your clients. It’ll take some effort, but in the end, it’s a return on investment you can count on.

Jerry Lezynski is Director of Marketing for the SEI Advisor Network. He is responsible for the overall strategy, development and execution of marketing and communications initiatives for the firm's more than 6,500 independent investment advisors.

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Care in a crisis

Perceived affordability of long-term care insurance (LTCI) has always been an issue, even during good economic times. With the economy now in a recession, people are going to scrutinize every expense — including LTCI — to see if it is essential.

There is also understandable mistrust of the financial services world and insurers right now. Many boomers have always had suspicions of the sales approaches and promises that the previous generation took to heart. People aren’t eager to put their money in places that aren’t federally insured.

Therefore, the wrong approach in this environment is to come in with a carrier product brochure and illustration on the first meeting and say something like this: “Hey, there is a chance you’ll go to a nursing home someday and this insurance will help pay for that. Oh, the premium is $3,000 per year and if you don’t use it you’ll get nothing back.”

Also, if someone doesn’t have current income because they have been laid off, they probably won’t be an LTCI buyer for obvious reasons. There does need to be some knowledge of the prospect’s financial condition before discussions can start. If proposed premiums are going to be greater than 5 percent of annual income, the recommended plan being quoted is too expensive.

Instead, a better idea might be to look at two other approaches in discussing LTCI; as a family protection plan and as an adjunct to a new savings plan.

First, long-term care is always a family issue and one that needs to be discussed regardless of how the problem is solved. The solution might be LTCI, or it might not be. However, by talking about the impact long-term care will have on the family, you are then moving the conversation from trying to sell a product, to trying to plan for something that will impact their lives and the lives of their families. And many clients will pay plenty to protect their family. For boomers, those who have life insurance are better candidates than those who don’t, because of the already-demonstrated commitment to the family. Others who they may know and respect that have purchased LTCI are reinforcers to the decision.

Long-term care can also be seen as a smart addition to a savings program. The greatest threat to someone’s retirement portfolio is a long-term care incident, and LTCI can help act as a “firewall” to that portfolio. The good news with this approach is that savings rates recently have increased while discretionary spending on luxury items has decreased. The use of financial calculators showing the impact of buying LTCI, now as opposed to later can be very effective.

Finally, make sure to quote a reasonable benefit that will pay for 2 to 3 years of quality care. The difference in a premium between “lifetime” benefits is considerable. Perhaps buying a policy with the ability to purchase additional benefits when times are better, while still guaranteeing insurability, is the most prudent approach.

Tom Riekse, Jr., CEBS is managing principal at LTCI Partners LLC, a brokerage general agency specializing in Long-Term Care Insurance. Riekse has been working in the Long-Term Care Insurance business since 1991 with an emphasis on executive and group long-term care insurance. He can be reached at tom.rieksejr@ltcipartners.com.
 

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Picking up the pieces

The question should ideally have been addressed when the client was still a prospect. At that time, if the client had a problem with the advice given by the former advisor, the very fact that he is now your client should be proof that he thought enough of your expertise and credentials to reasonably reassure himself that the mistakes from the past would not be repeated. Hopefully, you did a good job of convincing the client that you would try to ensure that experience would not be repeated.

Also, at that time, if you had done a thorough interview you would have found out exactly what the former advisor had done for or to the client. On some occasion, it is quite possible that the former advisor had done nothing wrong and that it was simply a case of some misunderstanding on the part of both the client and the advisor. Perhaps the client's expectations were a bit unrealistic, too. (For example, "get me out of the market when you see it going down, and get me back in when you see it going up. I don't want to lose money!") At that time, it is up to the advisor to impress upon the client the validity of his approach and what he can or cannot do for the client. For every prospect that comes into our office, I tell them that, after 26 years in the business, I still do not have all the answers, that I am not a market timer or a trader, and that I do not have a crystal ball - I still have to work for a living and if I had the magic formula, I certainly would not be sharing it with anyone.

When they mention past mistakes, clients usually are talking about losing money. Perhaps the former advisor had taken chances with the client's assets that he should really not have taken, and as a result the client lost an extensive amount of money. As long as you have taken into account their risk tolerance, their objectives and done a good job of diversifying the client's assets, you should be able to convince them of the validity of your approach, and how the past mistakes would not be repeated with such an approach.

There may also be times when the former advisor had really tried to do a good job, but the client became impatient and frustrated and decided to part ways with the advisor. Perhaps the only thing the former advisor was guilty of was inadequate communication with the client. If so, you have to let the client know that the previous advisor had indeed used the right approach and that perhaps the markets really were not conducive to better returns. You have to do this because one day you yourself could become a former advisor. Also, under these circumstances, it is imperative that you increase the frequency of client communications and make them aware that you are there to answer any and all questions. Hand-holding and showing you care are extremely necessary at times like these and can help overcome a lot of client dissatisfaction.

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Reassuring nervous Boomers

It’s extremely important to take a pro-active approach to addressing client concerns. You can send out periodic communiqués – your own newsletters or copies of articles addressing similar situations from the past. While these are good, and may even reassure clients for a while, the best way to calm their nerves is by periodically calling them to discuss the validity and content of the assets in their portfolios. You can tell them that their investments were made with their risk tolerance and objectives in mind and that, in the long run, a fully diversified portfolio will produce the rewards in keeping with their asset allocation.

Of course, this means that you have done your job by investing their assets responsibly and not speculated with the funds. Also, it’s understood that the percentage of growth and income were based on defined time frames; obviously, the shorter the time frame, the less the percentage in growth.

In the 26 years in this business, my experience has been that clients do in fact understand what’s going on and just need some hand-holding and reassurance. Media reports are enough to  scare anybody. To use a cliché, clients don’t care how much you know, until they know how much you care. It’s up to you to make sure that they know you’re looking out for them. It’s during times like these that you earn your fee.

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