Financial advisers love to give advice. That is, after all, the job description.
Yet the way that the profession and client expectations are changing mean that advice is not always what clients are looking for. There is so much more that advisers can offer, and that clients find genuinely valuable.
The current market crisis will highlight this for many advice firms. When markets crash and portfolio values drop as they have, clients will come calling. They will have concerns, and they will have questions. And they will need support.
However that doesn't mean they need, or even want, advice.
Be a good listener
The first, and most critical step is to make sure you are listening to your client. You might expect that they are calling at a time like this because they want to know what to do now. Your instinct may be to default to telling them to stay calm, and stay invested. However, you won't actually know if this is what they actually want to know unless you listen to them and ask the right questions.
There will of course be clients who want an action plan. In times of stress, it is natural for many of us to want to do something so that we don't feel helpless.
However, many clients, maybe even the majority, will really be after reassurance and understanding. Some will be sincerely scared about their financial situation, and an adviser who can offer them comfort is invaluable right now.
Tried and trusted
This is not the time for advisers to have stock responses. Truisms such as “we've seen many market crashes before” and “the market always recovers” may seem superficially encouraging, but they can sound hollow in the midst of a crisis.
Statistics are also not always helpful. Looking at the past 50 years, it has taken the FTSE 100 an average of 648 days to recover from a loss of greater than 20%.
With that number at hand, it could be tempting to explain to clients that markets usually recover in under two years. In 1975 and 1998, the recovery was between three and five months.
However your clients are not calling you about how they will be feeling in two years' time. They are calling you because of what they are feeling right now, and that is unlikely to change because you showed them some numbers.
The qualities that clients are going to value most at a time like this are compassion and honesty. That means, firstly, being prepared to really ask how the client is feeling.
Of course they are worried about the markets, but as an adviser you need to go beyond the superficial. The crash will concern them because of its potential impact on their goals – saving for their retirement or their children's education, for instance. Your concern should therefore not be the money itself, but what it is intended for.
This is why good financial planning is so critical. You need to be able to look at a client's plan and assess what the market crash actually means for their goals. How far has this knocked them off track?
For many well-constructed plans, even a crash like this may not have altered their long-term prospects. This will particularly be true for clients who still have time on their side. If you can refer back to discussions you had when putting these plans together, and remind them that this kind of possibility was factored in to their planning, that is both a huge boost to your credibility and probably to their state of mind.
But you also need to be honest. If the crash has materially disrupted their plans and there may not be enough time to recover, then you need to ask what they need from you. What information would they find most helpful? Treat that answer seriously, and do your best to provide it. Do not simply offer the generic response you already have prepared.
Importantly, clients need the reassurance that they always have options. While some hard decisions may have to be made, their financial prospects are never entirely out of their hands.
That should not, however, mean immediately dispensing advice about changing their asset allocation, upping their contributions or cutting their expenses. All of these may need to be looked at, but the height of a market crisis is not the time to be making long-term decisions.
It is far better to let them know that this is something that you and they are going to work through together over the coming months. This does not mean placing their hope in a market recovery that may take years, but assuring them that you will work with them to ensure that they still get as close to achieving their goals as possible.
That is the comfort that clients are looking for. And it is what the best financial advisers should be providing.
Picture: Taylor Grote via Unsplash