Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here.
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Dear Bev,
A number of our clients are watching the markets and becoming increasingly uncomfortable with the ups and downs. We have many retirees and soon-to-retire clients and 2008 is still fresh in their minds. They fear another disastrous downswing in their portfolios. Of course we talk about portfolio allocation, saving toward needs not just for returns, investing for all conditions and so on but the noise from clients keeps getting louder and louder.
Once, early in my career, I caved to pressure from clients and moved their allocation to a much more conservative structure. With 20/20 hindsight on my side, I can see it was the wrong thing to do because they lost out on a significant run up in the market and I lost every single one of them when times were good again.
I’m not asking you for investment advice, but I don’t know how to deal with the pushback from clients and even my own concerns about making another mistake like I did many years ago. Do I need some reinforcement that staying the course in these market conditions is the right thing to do?
J.R.
Dear J.R.,
The investment industry is a fascinating business, isn’t it? Google “market outlook” and you will get 15 different viewpoints and predictions depending on the expert listed. No one can predict the future and even though we do have history as a guide, and certain algorithms that may (or may not) help with indicators, it is very difficult to call it right every time. I just completed a training course for a client where I included a great deal of information on behavioral finance and the impact of emotions on investing. I was reminded again of how much emotion, versus logic, plays into market activity.
Please do not to beat up on yourself for your mistakes of the past and to the degree you can, purge that memory because it is obviously affecting how you are making decisions. Our fears are always a combination of repeating past mistakes, or worrying about something unknown we don’t know how we will deal with or control. The problem with being fearful is that it limits our ability to make objective, unbiased decisions. You are doubting yourself and reviewing everything you are doing to ensure you don’t make another mistake.
So while I cannot give you investment advice or tell you how to reallocate portfolios in these turbulent times, I can give you some ideas about how to communicate with fearful clients.
But first, you must practice some approaches to help you increase your confidence level and decrease your stress associated with this. Review some of my past columns on ideas for this – deep breathing, guided meditation, positive imagery could all be helpful to you. It’s so important you are confident and not second-guessing yourself or beating yourself up by reliving some past mistakes that are now influencing what you choose to do today. Others can sense our fears and worries and if you are not confident, your clients will not be so either!
Think about your clients’ mindsets. You mentioned several of them refer back to the drop in 2008. They are probably scared and concerned something like this could happen to them again. People are not rational when they are operating with emotion, especially negative emotion. When your clients express their nervousness, avoid answering with facts and data. “Don’t be concerned, look at how well your portfolio is allocated!” This can seem like a logical response, but it doesn’t address the underlying concern – this is typically “Am I going to have to eat cat food because I run out of money?”
When a client expresses their worry, refrain from just answering it. Ask them what they are reading or hearing that is worrisome to them. Ask them what specifically they fear. You don’t want to exacerbate a worry, you want to surface it so you can deal with the real issue. By putting aside your own need to answer it, and show them how things are just fine, you are being respectful of their right to have a concern.
Once you ask a few questions to help them surface their concerns, next ask what you could do or show them to help put their mind at ease. Tell them you are confident in the decisions you’ve made for their ability to reach their goals, and acknowledge that no one has a crystal ball right now and there will likely be some bumps in the road, but remind them about where they are headed and why you’ve made the decisions you have. Bring out any risk questionnaires or notes from risk discussions and revisit with them. Clients may say they can suffer a 10% loss when markets are going strong, but when the drops start to come, 10% may seem like far too much to lose. Context is everything! It could be a good opportunity to revisit these discussions with them. Maybe you should make some changes to the allocation if it is just too stressful for them.
Look at this as an opportunity to open dialogue, listen well and probe for understanding and to address concerns in a respectful and open manner. You can’t control what happens, but you can control how to react and respond to the clients you serve.
Dear Bev,
My newest team member is a talker. He likes to talk about everything. I don’t want talking, I want doing – and action. He comes in and tells me every single thing he has planned and will be doing for clients that week. I want to yell “then just DO it!” Why does he have such a need to share everything and more importantly how in the world do I get him to stop talking??
P.T.
Dear P.T.,
Sounds to me like you have hired yourself a very high I. I use a behavioral profile called DISC and the “I” factor is about Interacting, it’s a people scale and those who are high on it have a need to verbalize. They “talk to think” and like to share as much information as they possibly can. By contrast, you are likely a lower I. People who don’t rate so high on this scale would rather fewer words, preferably in bullet-point format.
You don’t say why he is talking to you – just to shoot the breeze, or to give you an update of what’s going on? Or is it a subordinate-to-boss discussion? If you need him to share information, try coaching him on how to do so. Explain to him you are someone who likes fewer words delivered to you in a more “chunked down” format – tell him less is more. Coach him on how to present – bullet points, letting you know what he wants to achieve out of the discussion, how to organize his thoughts etc. We get frustrated with people who are different from us, but then we don’t take the time to teach them how to communicate with us differently! Take the time to do so. He’ll appreciate it too.
Beverly Flaxington co-founded The Collaborative, a consulting firm devoted to business building for the financial services industry in 1995. In 2008, she co-founded Advisors Trusted Advisor to offer dedicated practice management resources to advisors, planners and wealth managers. She is currently an adjunct professor at Suffolk University teaching undergraduate students Leadership & Social Responsibility. Beverly is a Certified Professional Behavioral Analyst (CPBA) and Certified Professional Values Analyst (CPVA).
She has spent over 25 years in the investment industry and has been featured in Selling Power Magazine and quoted in hundreds of media outlets, including the Wall Street Journal, MSNBC.com, Investment News and Solutions Magazine for the FPA. She speaks frequently at investment industry conferences and is a speaker for the CFA Institute.
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Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here. 
