Using client reviews to rebuild trust
Investors are angry, scared and looking for someone to blame for the economic downturn, and unfortunately, advisers often are the scapegoats, bearing the brunt.
Investors are angry, scared and looking for someone to blame for the economic downturn, and unfortunately, advisers often are the scapegoats, bearing the brunt.
Since advisers can’t ignore or avoid angry clients (after all, the only thing worse than an angry client is no client at all), the best way to overcome negativity and restore confidence and trust is by offering solutions based on solid information.
A properly conducted client meeting or annual review — where you provide planning-based solutions reflecting a client’s unique circumstances — is the perfect way to re-establish good will.
Here’s how to begin.
First, acknowledge that retirees and near-retirees have been the hardest-hit group in this bear market. Generally, they accumulated the most wealth and stuck with equities through the downturn in hopes of generating meaningful income. Now they’re fearful of losing their lifestyle and are likely to feel betrayed by Wall Street.
To restore confidence, save a discussion of investment strategies for later and focus on a planning approach. Yes, some of these clients may want to talk about emerging markets or drug stocks, but at the end of the day, they really want to know if they can afford to visit their grandchildren or take a cruise.
Consider the case of a retired couple with a moderate risk profile. Like most people in their situation, they’ve lost money in the market but don’t fully understand how the decline in the value of their investments translates into changes in retirement income and spending adjustments.
In planning for their meeting and review, focus on assessing their situation and the steps that can be taken to remedy it. Tell them you want to revisit their retirement plan and reassess their financial situation using planning software.
Next, do as much fact-finding as possible with respect to how their situation has changed. Since you already know about the assets held with you, ask about assets held elsewhere. Also ask how spending habits have changed. Are they spending more on basics? More on health care? Less on entertainment? Have they changed their estate-planning goals?
As you ask these questions, you’ll be able to determine the drivers of their anxieties and fears, learn about their new priorities and identify what compromises they’re willing to make.
At the meeting, use the information as a catalyst to rebuild trust. Come to the meeting prepared with a few scenarios run through your retirement-planning software. Having quantifiable data to support your recommendations goes a long way to restore trust.
Specifically, prepare three scenarios — the first showing the client’s situation based on current assets, a second showing a 5% to 10% reduction in spending and a third showing additional income from part-time or other work.
While none of these models is likely to be a panacea, together they will show incremental improvement. The key is to show your clients there are alternatives and opportunities for long-term success.
For the meeting itself, be prepared to cover three topics.
Begin with a discussion of the client’s current situation. Besides reviewing asset levels and investment allocations, provide them with an opportunity to vocalize their frustration. By doing so, you’ve let them know they’ve been heard and that you empathize.
After a review, discuss the client’s new reality. Since assets are likely to have declined, the probability of meeting long-term income goals probably also has slipped. This is the new reality, so focus on understanding what your clients are prepared to do to adapt. Having clearer insights into your clients’ mind-set will enable you to make better recommendations for their portfolio.
Finally, focus on their new opportunities. Explain how you can restructure portfolio and retirement plans to improve chances of long-term success. This may involve revising risk tolerances and asset allocations or require that clients buy into a new budget or revise legacy planning goals.
Understanding the new reality and having a workable plan will go a long way to reducing client anger and frustration, as well as provide your clients with hope. And by taking the time to prepare different plans in advance of the meeting, you demonstrate to clients that they are valuable to you and worthy of your time, which will help rebuild trust and restore confidence.
Keith Hylind is vice president of retirement solutions at OppenheimerFunds Inc. in New York. He can be reached at khylind@ oppenheimerfunds.com.
Learn more about reprints and licensing for this article.
