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Recently, an advisor emailed me asking for suggestions on how to deal with clients who sold some or all of their portfolio near the 2008 lows.
More specifically, he wanted to know if it’s worthwhile educating these clients on where they would be had they not sold out. Should he risk further damaging their ego and what remains of the relationship?
He also asked for my thoughts on dealing with three types of fears he’s seen emerge among his clients:
- Almost a permanent "pessimism" about the world – that markets will crash again (and he’s not sure he wants to keep these clients)
- Acknowledgement that it was not a good time to sell and considering reentry in the markets (these clients make him slightly nervous since there will be drops in the market in the future)
- Frustration and near paralysis ... and uncertainty as to what to do, especially given low interest rates.
Clients who sold at the bottom
For clients who bailed out in late 2008 or early 2009, it’s worth approaching them about sitting down and revisiting where they stand.
The key is to make this conversation forward-looking, focusing on the opportunities today – there’s nothing to be gained by going back over missed opportunities.
So it comes down to making an assessment of today’s valuations, clients’ time frames and their ability to withstand market downturns – and also the rate-of-return they need to achieve their goals.
As for clients who are still apprehensive, many investors are spooked by all the negative headlines in the media.
Here you need third-party support. I have posted articles referring to positive comments about prospects for the period ahead by Warren Buffett, Steve Ballmer and Jeff Immelt at a conference in mid September.
