How to turn a down market into client loyalty

The stock market dropped 5% yesterday, wiping out gains for the year. While this is bad for portfolios, it doesn't have to be bad for your client relationships.

Will the market bounce right back, or continue going down? Is this the beginning of the next bear? Who knows.  In terms of the growth of your practice, it may not matter. You do not have to be slowed down by the direction of the market. The fact is the best and most successful advisors add clients in down markets.

I don't mean to suggest that it will be pleasant. Is going through a down market easy? No. Can it be rewarding? Absolutely.  Everyone looks like a genius in an up market. The professionals standout when things are rocky. How do you build and strengthen client relationships when the markets are bad? Here are some suggestions.

1. Review your client portfolios and make sure you are prepared for a market downturn. Confirm that positions and allocations have not gotten out of whack because of market gains over the past couple years. Evaluating how those portfolios might respond if markets or interest rates changed suddenly or significantly, and make any adjustments you think appropriate.
2. Be ready to describe to your clients how you have prepared for the possibility of a market change. If the markets begin moving against you, have a communications plan that includes mass e-mails or letters and the conversations you will have individually in client appointments.
3. If the markets continue their slide, send out a communication to all clients. Let them know you are watching what's going on, and are prepared to make any changes that are appropriate when the time comes. One of the more interesting things I have learned from working with client groups is that they have little understanding of all the work you do on their behalf when they are not in front of you. Let them know. You don't necessarily have to see them more frequently when times are bad but they need to understand that you are always diligently looking out for their best interests.
4. Bring your clients together. If you have put off or neglected an advisory board, or have been considering starting one, now is the time to get it on the schedule. Engage your clients to tell you what they worry about. It may not be what you think. Get there guidance on the best ways of keeping in touch with the markets turned bad again. Whatever their concerns, get them to tell you what kind of communication with most effectively addresses their worries. Would it be letters, individual reviews, or group meetings? Should you be discussing their portfolios, or showing them the impact of a downturn on their financial plans?
5. Act on their advice. When you implement your communication strategy, refer to your advisory board. Let all clients know that there is a group of clients you are actively engaged with to help you understand what kind of response would most effectively address what's on their minds.

Many of the advisors I worked with in 2001 and 2008 were drained and exhausted by those difficult markets. The ones who kept in touch with their clients most effectively were rewarded for all that additional work with larger practices. Engaging your clients when things are bad will make your existing client relationships stronger and attract new ones.

How Do Your Clients Describe You?

There has been a lot of ink devoted to the importance of a financial advisor’s value proposition. But there may be something more important than how well it is written and how well it differentiates you.

As discussed in the Art Of The Referral, client referrals actually happen when a client's friend asks for a referral or has a financial need. This is the moment of truth. When a friend, acquaintance, or business associate of a client expresses a need for your services, will you spring into your clients mind?

It is important that your value proposition describe what you do in a way that distinguishes you from other advisors and is meaningful and compelling to the people in your target market. It is just as important (maybe more important) how your client describes your unique value. At the moment of truth, will your client put together their friends need with the problems you are especially skilled at solving, and remember to refer them to you?

You know that I advocate engaging your best clients through an advisory board to discuss what they most value about your services. That's the best way to know how they describe you and to get their guidance in refining a value proposition. But there are other ways to find out how they describe your value. You can uncover it in a client survey, or by incorporating a question or two into your client meeting agendas.

Once you uncover how your clients describe your most important value to them, you may need to work with a few select clients adjusting it. While you want it to remain in their words, you may want to emphasize specific services or an investment style. Continue to work with your clients so that you project the right message, and any adjustments continue to ring true to them.

Finally, the polished value proposition needs to be communicated back to clients. You can publish it in a client newsletter.  You can incorporate it into a brief discussion of the clarified statement at the end of appointments:  “We have been working to focus on providing [type of services] to [type of clients].  If you have any suggestions on how we can do that better, we would appreciate your help.” 

Devote some attention to educating clients on how to describe your value, and referrals will come much more naturally.



Financial Advisor Checklist for Client Meetings

One of the best situations, in my view, to benefit from the use of a checklist is the client meeting.  With them, you can help assure that you and your staff have properly prepared, that you discuss all the necessary issues, and that all the necessary follow up is done.

I will post some examples of checklists you can use, and will create a page where you can post some of your own so that you can get some ideas or suggestions for improvement.  In the meantime, Horsesmouth just featured an article last week about this very topic, so I wanted to provide you the reference.

You can find the article here.  It is in the subscriber area, so if you are not already a member, you can sign up for a free trial.  If you have not already checked it out, I recommend it.  There are articles every day with valuable ideas and advice.