Over at Dimensional’s blog, they recently included a post on how financial advisory firms are communicating with clients during COVID-19.
The responses are varied. “We can’t communicate with clients enough” from Jeff Buckner at Plancorp, to “many of our clients don’t worry until they hear from us” from Mike Davis at Resource Consulting Group. Along the same line of thinking was Jeff Troutner at Equius Partners, suggesting they don’t rush out a letter after the first day of significant market decline.
Personally, I think all the answers are good. Many of them dive further into highlighting a certain number of years’ spending available in fixed interest to reassure their clients they don’t have to take any action. Equities have taken a bashing. Historically they have recovered. In the short term all spending needs are covered. It’s a good message.
When it comes to communicating I believe the most important thing is consistency. I tend to take the same view as Resource Consulting’s clients and Jeff Troutner. Don’t rush out a letter the moment markets fall. Clients can panic and worry if you’re suddenly all over them. The biggest issue with stepping up your communications game is your horsepower. Do you have the stamina to keep it going and when does it get too much?
If you’re suddenly in your clients’ inbox every week, (or worse), every few days, at what point do you taper off? At what point do they get sick of you? COVID-19 looks like a marathon, not a sprint. If you have a regimented approach already in place, stick to it.
We have increased communications. Personally, I’d prefer not to get out of step with my regular routine, however this event is slightly unprecedented. I also have extra demands. A direct client base who receive regular communications and advisers who receive those same communications, but maybe only use them sporadically. Some of those advisers with the sporadic messaging were expecting a something they could put to their clients after the big falls in early March. I had to deliver one. While not my preferred scenario, it’s pleasing the feedback on what I’d done has been positive. I had several responses telling me no one wanted to sell. Several clients responded asking to invest more.
Even if an adviser only goes with the “contact in event of emergency” it does give them a history of consistency. Each time they can point to the previous time. And the previous time. And the previous time. The message will eventually sink in. Building resilience will take time, but it begins from the first meeting.
I’ve heard of one adviser who has a blunt message for clients when he first meets them, “the markets are going to fall at some point, don’t call me about them!”
It’s a take it or leave it approach, but there are no illusions. If you’ve established expectations, stick to them.
To me, it’s no different to your investment philosophy. You refer and adhere to it at times like this. It keeps your behaviour consistent in all market conditions.
Don’t toss it out the window and start again during a crisis.
The next question is where do you go next? Don’t be overly opportunistic, but it’s time to start looking collating examples of the various strategies that haven’t served investors well. As Norm Mindel suggested, ” I think our next piece will focus on the failure of hedge funds to deal with this crisis. Clients at some point will want to know what is working and why they did not invest in that.”
Dividends cut or pulled completely. Redemptions halted. Funds shuttered. Falls way in excess of benchmarks. Or just the failure to hold enough cash or fixed interest when an investor still needs to spend. Fair weather options without the backing of evidence will be exposed.
It will be time to highlight why you excluded them.
This represents general information only. Before making any financial or investment decisions, I suggest you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs. Don’t make financial or investment decisions on the basis of blog post or sourcing advice from internet forums, if you’d like a introduction to investing, please consider reading Your Investment Philosophy, which offers an evidence based primer for building your own investment philosophy.
