3 Steps for Better Conversations

Clients today have every right to be fearful. Looking at the markets (and their 401k balances), they see nowhere to hide – inflation is at 40-year highs, the S&P 500 is down almost 20% off of its highs, and the bond markets are having their worst year in decades.

Research shows that increased communications during times of trouble can help strengthen relationships and provide clients with the resolve they need to weather the storm. In a study conducted by Invesco in 2020*, 82% of investors who heard from their financial advisor during the start of the pandemic would be happy to refer their advisor to a friend or family member.

But not all types of conversation are effective. In this article, we’ll share a three-step process for communicating effectively with clients during times of stress.

First, it’s time to hear the client out. Give your complete attention; close email, put away your phone, and avoid breaking into the conversation with feedback. If you’re meeting in person or on camera, be sure to make eye contact. Small cues that you are distracted can have an outsized impact.

During this phase, it is important to ask questions that are open ended, so you don’t lead the client down a predetermined path. A few good examples include:

• What are your biggest concerns right now?
• What is important to you right now?
• What is your biggest goal for the future?

Rephrase, in your own words, what you heard the client say. Don’t skip this step—it provides important space between hearing the client and offering a solution. It’s a way to show the client that you understand their unique situation and perspective. It also offers an opportunity for the client to correct any differences between what they said and what you heard. You can’t address a problem if each of you have different thoughts on what the problem is.

Addressing the client’s concerns head-on using data or historical examples can help put things in perspective.

It’s important to remember that investors get most of their day-to-day financial information from the financial news media. During market pullbacks, the media is talking to broad audiences, not personalizing their message to the needs of any one investor. Media messages all too often exacerbate fear and worry by highlighting negative news. The opposite is true in soaring markets.

By focusing the client back on their specific goals and objectives, you can help them decide if they actually need to make any changes to their investments, or if their plan is likely to hold up. Income Planning, or liabilities driven investing, can be a powerful tool to help the client visualize how much a market downturn might impact their long-term income needs. In this article, we discuss how income planning can help clients make better decisions.

As with any long-term investing strategy, over time, it makes sense to re-examine clients’ risk tolerance and recalibrate portfolios if necessary. Ensuring that clients’ investment allocations are personalized to their objectives and incorporating diversification and risk management is a great start. After that, communication plays a large role in shaping how investors think about the markets and how they react to uncertainty.

A dedicated communications strategy — one that focuses on helping clients understand how the current market volatility will impact their unique goals and objectives — can help set you apart from the competition, while helping clients stay focused on their own situation instead of the daily gyrations of the benchmarks.

Originally published by Clark Capital Management Group on 12 May 2022.

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