Optimism is the most important human trait because it allows us to evolve our ideas, to improve our situation and to hope for a better tomorrow.
– Seth Godin
In a year filled with market turbulence, social distancing, and new business processes, all of us have had a lot to deal with. The COVID-19 pandemic has rapidly transformed how we’re interacting and doing business with each other. And the volatility of the financial markets has certainly offered up its share of roller coaster emotions. But, as is often the case when faced with challenges, humanity prevails with remarkable resilience and innovation. Through it all, advisors have provided steady calm and reassurance for clients who’re looking for advice, information, and solace.
“The value of an advisor is not only about creating a portfolio and conducting investment trades, but rather about creating great long-term outcomes for clients,” says Bernard Letendre, Head of Wealth and Asset Management, Canada. “It’s about being available to talk through big life decisions — whether it’s buying a home, getting married, or dealing with divorce — and then helping people to figure out things like budgeting, good saving habits, wills, trusts, estate plans, and more.”
As we all continue navigating the way forward during these most unusual times, consider this your primer on how to elevate the value that you bring to your clients day in and day out.
What clients (think they) want
Perception is an interesting thing. Advisors may feel that they have a pretty good handle on how they can help their clients, which includes managing expectations. But on the flipside, clients may have a completely different point of view.
Consider a recent report prepared by Morningstar, Inc. In the study, The Value of Advice: What Investors Think, What Advisors Think, and How Everyone Can Get on the Same Page, hundreds of advisors and investment clients were asked to rank a list of 15 attributes in order of importance:
While clients and advisors agreed on some of the most important attributes, there were interesting differences in their priorities. The good news is that both groups felt that the “Helps me reach my financial goals” attribute is important. However, the results make a strong case for advisors to continue educating clients on the importance of investing fundamentals.
For investors who participated in the survey, attributes related to rate of return ranked higher than investing fundamentals, which was where advisors focused more. “Can help me maximize my returns” was ranked fourth by investors, while advisors ranked it 13th. “Helps me stay in control of my emotions” was ranked last by investors. The table below shows where advisors and clients share similar views and where they’re far apart in their thinking.
Cognitive biases and investment decisions based on emotional reactions can have significant impacts on an investor’s portfolio and estate plans.
“There’s often a disconnect between what customers think they need most from their advisor and what advisors do that actually brings the most value to their customers, “says Bernard. “This begs the question: Should advisors simply double-down on what customers may think is good for them, or ramp up their efforts on educating customers on what will actually help them to achieve their most important goals — what they bring to the table as human advisors?”
If anything, the value that an advisor offers may only be increasing amid the stresses of the current environment. Advisors can help guide and educate clients on decisions that make sense and aren’t fueled by emotional reactions.
Although the initial market shocks from March have now subsided, with a gradual economic recovery well underway, there’s little doubt that emotions continue to run high. Having a checklist of a few key fundamentals close at hand can help guide client conversations. Consider these five timeless principles:
Diversify – Don’t put all your eggs in one basket. Allocating capital across a range of investment classes helps to balance risk in a portfolio while reducing major impacts that could be felt by underperforming assets.
Emotions – Time and again, emotions get the better of investors. Fear of missing out can prompt buying at the high point in the market, and fear of losses can prompt a selling spree when markets dip. Being mindful of the emotional roller coaster and staying committed to a long-term plan can help investors stay on track.
Stay invested – Trying to time when markets are rallying or bottoming can be a fool’s errand, with investors likely to diminish long-term returns in the process. During times of volatility, markets can experience quite large swings, and investment success or disappointment can boil down to just a few days of being in or out of the market. Trying to chase market ups and down can result in a frustrating whipsaw of buying high and selling low.
Long-term focus – Just as the sun rises and sets, the markets will rise and fall. Accepting this fact and adopting a long-term perspective can help investors stay the course and avoid the pitfalls that come with reacting to a crisis.
Dollar-cost averaging – Use an investing strategy based on consistency rather than trying to time the market. Rather than investing one big lump sum at the perfect time, dollar-cost averaging invests smaller amounts consistently every month or every quarter. Based on market fluctuations, you buy more units when prices are down and a bit less when markets are up. But in the long run, everything balances out.
The COVID-19 pandemic has certainly been a wake-up call, as many people wonder if their investments are safe and if they have adequate insurance coverage. In a recent survey, 67 per cent of respondents said 2020 has prompted them to examine their finances, and 30 per cent said life insurance has been a topic of discussion.¹ Few can dispute the importance of life insurance and the hardships that families face without that peace of mind.
“More than ever, Canadians are questioning if they have enough insurance coverage and are looking for that information,” says Rob Hollingsworth, Head of Insurance Sales, Retail Markets at Manulife, Canada. “It’s important that advisors have the tools they need to give their clients the best experience possible in our new online world. Through a number of digital innovations, we are making the insurance application process easier and faster.”
With family security top of mind for many, consider how your clients may be feeling right now. Proactively addressing their anxiety and helping them to make sense of jumbled emotions is an important part of the value that advisors offer. Your clients may be thinking things like:
- I’m concerned about this pandemic and need life insurance, but can I afford it?
- I honestly don’t understand insurance and I’m embarrassed to admit it.
- The application process is complicated, and I just don’t have time for it.
Proactively reaching out and anticipating some of the resistance a client may have offers you the opportunity to strengthen your relationship, understand the client’s situation better, and offer perspective during a difficult time. If you need a bit of help in starting the conversation, consider these pointers:
Be genuine – Ask clients how they’re doing, and how their family, friends, and colleagues are coping. Be a good listener.
Be prepared – Your clients probably have ongoing questions and concerns and will expect your guidance. Always be ahead of the conversation — anticipate their questions and be ready to discuss the latest economic developments and their impact on your client’s portfolio.
Have solutions – Many households are facing a great deal of change as a result of work stoppages. Career paths, household budgets, school dreams, travel, and retirement plans may feel very up in the air for a lot of people. You can be the calm in the storm by helping your clients talk through how their plans may need to be adjusted. This isn’t your opportunity to pitch new business but rather your opportunity to be a trustworthy partner who cares and wants to help.
Take notes – Keeping track of your client conversations will help you stay organized in following up on any questions or requests that your clients may have. It’s also important to record client communication preferences, information you’ve shared, and potential opportunities that you may want to explore when the time is right.
Share relevant content – Follow up that phone call or video chat by sending your client information on topics that make sense for them.
A coach, a mentor, a trusted friend, the voice of reason — these are all the hats an advisor wears when helping clients navigate the twists and turns of their financial journey. As markets continue their slow recovery, this guidance is more important than ever.
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