In the wake of the 1987 market crash, I traveled throughout the Northeast working with financial advisers and found many were shell-shocked and hiding under their desk. They were lost and desperately needed guidance on what to do next.
At one firm in Binghamton, N.Y., for example, most of the advisers wandered around the office aimlessly. Concerned, I offered to do a training program in listening, called The Elements of Persuasion.
My message was, and is, simple: What clients want is someone who is calm and confident, reaches out to them in times of need, listens to their fears and concerns, provides appropriate guidance and represents themselves with authenticity.
Recall, retail investing was new back then. As we know it, retail didn’t get started until 1979, when money poured out of banks into money market mutual funds paying as much as 18%. That led to bond fund purchases as yields went lower, until March 1987, when the bond market crashed. Sadly, many investors moved from bonds to stocks in the wake of that crash and too many investors drove off a cliff later that year.
Here is what I said then, and what I recommend now to financial advisers:
•Be in touch. Check in with every client even if it’s only a voicemail, text or email (and the email should be personalized). Let clients know you and your team are doing everything you can to monitor a fluid situation. •Set an empathetic and confident tone. Be cool, calm, strong. •Acknowledge the uncertainty and your commitment to their success over time. •When speaking with clients, listen. Ask them how they are doing. Be empathetic. Listen some more. Establish you are on top of this situation.•Let clients know we expect a rough patch for a while, butyou and your team are monitoring the situation with their best interests at the forefront. •Model yourself on Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases. He’s an experienced professional who gives honest, constructive guidance. As he says, “We will get through this, but we need to do smart things now.” Clients want that kind of honesty, gravitas and guidance from their advisers. •When you deem it appropriate, educate your clients on managing their assets with the two key levers that can be controlled to improve outcomes: risk and tax. Be sure to look at tax-loss harvesting, tax-smart asset location and household rebalancing as markets are sure to have put the household portfolio out of whack.
Having been in this business through many crashes, bubbles, crises, recessions and all the other challenges that inevitably come our way, I can tell you all the above works. For those who have been around for a while, you know that once things settle down, there will be a lot of money in motion. And it will go to the people who listen, connect and are empathetic. Lastly, have ideas on how to manage risk and tax to improve investor outcomes and comfort.
Going deeper, both the client and the adviser will benefit from the fundamental and universal value of a relationship based on authenticity, caring and trust.
Jack Sharry is co-chair of The Future of Financial Advice initiative at InvestmentNews, co-chair of and executive vice president of