The S&P 500’s late September and early October swoon
appears to be well in the rearview mirror. But investor concerns about the
U.S.’s uneven economic recovery, rising interest rates and global turmoil will
likely mean more and sharper bouts of volatility during the next few months and
beyond. In the third quarter, managing volatility was advisers’ top concern for
the second consecutive quarter, according to a survey by a unit of Fidelity
Investments. Proactive advisers can thrive during volatile periods. Advisers
can do more to reinforce the message that volatility should be expected, and it
benefits clients who keep investing regardless of the market’s wild swings.
It is a reminder to investors that the market won’t behave
differently the next time there is a downturn, and that they shouldn’t alter
their portfolio if their goals haven’t changed. Showing investors in dollar
figures how much their portfolio will lose if the market declines by a specific
percentage helps them grasp the real impact.
When the market does pull back, market commentary should be
mailed to clients quickly. But most advisers shouldn’t try to write the
commentary themselves. For one thing, it takes too long to move the commentary
through compliance. Often, an adviser’s brokerage may provide commentary; if
not, there are plenty of other commentators willing to share their views.
Advisers should choose one who agrees with his views and add a paragraph or two
of introduction before sending it on to clients, he says.
Advisers can react more expeditiously if they segment
clients based on their risk tolerance and the frequency of communication they
require rather than their net worth. That makes it obvious which clients to
call first when the market takes a big dip.
Don’t assume that clients who don’t call aren’t worried.
Instead, call and probe those who have been most skittish. Tone is key. Explain the long-term plan, then
note that in the short-term, the market doesn’t go up in a perfect straight
arrow.
Having those conversations may force an adviser to put some
marketing efforts aside, but such calls and emails will likely bring in more
business in the long run. A client’s friends and family members are likely
entertaining the same questions and concerns. When an adviser reaches out, it
may make a good impression and prompt them to call.
For clients who tend to remain calm, old-fashioned snail
mail may be the best way to communicate, given that emails often don’t catch a
person’s undivided attention. Reach out to clients no more than once a week,
because frequent communications can seem panicky. Email-marketing services can
make the job easier by streamlining distribution lists and permitting an
adviser to see who has been reading his emails.
Above all, advisers should be visible and accessible during
times of market turmoil: take a client to dinner, visit so-called top clients,
prospects and “centers of influence”--lawyers or accountants, for example.
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