Leadership Perspectives | 05.13.20
Getting Through a Crisis
Make no mistake. At this moment, we are in a crisis. COVID-19 is a world-wide public health crisis the likes of which hasn’t been seen since the Spanish Flu epidemic when an estimated 500 million people were infected (roughly 25% of the total world population at the time). The major impact COVID-19 is having is the dramatic effect on the world and U.S. economies and investments. Yes, there have been other crises, but this one feels differently for a couple of reasons. I believe that the reason for this is that COVID-19 is causing universal spikes in stress — on individuals, the health care system and the markets. This stress is so heightened because of three things: the uncertainly in people’s lives caused by the virus, the lack of control people have over it, and the uncertainty about how long it’s going last. Until we have some solid answers to these unknows, stress levels will stay high.
Financial advisors are in a unique position with their clients. Clients rely on their financial advisors for information and advice about the economy, their investments, and financial strategies to achieve their goals. Particularly in times of crisis, financial advisors have an obligation to meet the challenges. Below are suggestions and tips to help your clients in their time of need.
- Communicate, even if you don’t have all of the answers. Letting clients know that you care will go a long way. It will help calm them and, in the long run, retain and strengthen existing relationships. Remind clients of good investments they made (like in fixed annuities or equity-indexed annuities). Reinforce the long-term nature of equity-based investments. If you have bad news, tell them. Delivering bad news is better than silence. You can also work with your compliance team to find ways to stay in touch. This can be in the form of newsletters, video conferencing, or text messages — whatever works best for you and your clients.
- Keep them from panicking. Research has shown that retail investors almost always sell at bottoms and buy at tops. Even the pros can’t pick tops and bottoms.
- Stay positive. If clients feel you’re panicking, they will sense this. Remember, you’re the professional. In the most trying times, clients are looking for solid information, guidance and advice from you. And, when you don’t know, it’s OK to say so.
- If clients have cash, remind they that the drop in prices is creating amazing buying opportunities. You’re monitoring these opportunities and will keep them informed.
- Reach out to your peers. This is the right time to stay in touch with other professionals and share information, strategies and ideas. No one has a monopoly on good ideas.
- Keep in mind that bare markets are a great time to prospect for new clients. So many financial advisors hide in tough times. Perhaps not right now, but be ready.
- Mangers should approach this crisis with the mindset that their financial advisors are their clients. All of the actions mentioned above apply to how mangers need to approach their financial advisors. It’s important for mangers to stay positive and to lead. Attitude and actions matter. You can also think of this as an opportunity to recruit new financial advisors to your team. Many financial advisors are looking at dramatically lower compensation. Since so many assets are now managed, financial advisors are looking at 20-50% reductions in fees.
It’s anyone’s guess how long this will last or how bad it may get. But we all know that we will get past this crisis if we stay focused, positive and professional. We can do no more.