When Your Clients Are Freaking Out — How Advisors Respond

Is it the trumpet of the Black Swan? That’s basically what clients are asking advisors this week as markets drop in a white-knuckle slide uncomfortably reminiscent of 2008.

Calls from clients have been picking up as advisors counsel them to hold steady and remember their long-range plans, Financial Planning Association members said.

Some sent email messages to clients as the markets started to crash this week as a preemptive measure, which apparently soothed some. Advisors who sent them seemed to have fewer calls.
But it was quite apparent that many clients are anxious as headlines blare the worst plummet of the indexes since 2008.

John Carbonara, NXT Phase Financial Services in Jericho, N.Y., was one of the advisors who sent a message to clients. He focusd on answering questions clients might have about the coronavirus’ relationship to the markets’ volatility.

“After weeks of headlines about the coronavirus outbreak, markets have been caught in a volatile pattern of surges and retreats. Here’s what you should know,” starts the email, which included this chart showing market performance before and after previous outbreaks.

“I get calls regardless,” Carbonara said. “I may have a conversation today and feel good about my conversation with the client and just a few days later I will have to repeat the whole conversation. We try to provide rational advice, but in the moment they might not be thinking rationally. It's the old ‘this time is different.’”

Lisa A.K. Kirchenbauer, Omega Wealth Management, Arlington, Va., has not heard from clients since her team sent two emails this week and has been posting commentary from the firm’s custodian and investment partners.

“Most clients have been appreciative and have actually provided additional updates as a result of the emails we have sent,” Kirchenbauer said. “As a team, we have had a plan in place for several years to be proactive in preparing for both a short and longer-term downturn.”

The team also knows clients’ liquidity needs and required minimum distributions.
“We have a list of clients prioritized by those taking withdrawals or that we know will need cash soon like for college,” Kirchenbauer said. “We will be checking their accounts.”

The firm has a strategy to cushion RMD withdrawal during downturns.

“For a couple of years, we have been putting the amount of the next year's RMD in cash in advance to prepare for a market downturn when they have to take an RMD withdrawal and their investments are down,” Kirchenbauer said. “We are also going to encourage more videoconferencing vs. face to face meetings if that would be more comfortable for them.”

And just to be safe, they are encouraging any clients planning travel to buy some travel insurance.

Advisors who did not send preemptive email messages had a consistent message when clients did contact.

Thomas I. Rindahl, TruWest Wealth Management Services, Scottsdale, Ariz., used the calls as opportunities to remind clients of their priorities.

“I have spoken to multiple clients who have been concerned,” Rindahl said. “We have used the opportunity to reevaluate risk tolerance, goals, and time horizon. These conversations have helped to keep a proper perspective.”

Serina Shyu, Jon Baker Financial Group, Atlanta, had only one email from her clients but she had a response prepared.

“I had a client email me this morning asking if she needed to make any changes to her investments,” Shyu said. “Here's how I responded:

“I’m so glad you asked. We are taking a long-term view of the market. We have a plan in place for you and the accounts are invested according to the investment policy statement (IPS) we drafted when life was more balanced/sane. I totally understand that it’s been fluctuating lately due to people’s fears of the coronavirus, but dips in the market tend to mean there are positive upswings once you’re on the other side. Even if this event lasts for another couple of months or (yikes, hopefully not) years, you will be invested for so much longer that it’ll be a blip on the radar in the grand scheme of things. Given your risk tolerance and investment time horizon (which is today through your retirement years – maybe 50+? years), we would not recommend any changes.”

Charles L. Failla, Sovereign Financial Group, New York City, has been responding to calls and emails with a reminder of the client’s plan for liquidity and longevity.

“My response has been to remind them of the work we have done together to compile and regularly review a formal financial plan,” Failla said.

“This plan ‘quantifies’ two main data points: How much money does the client need; when does the client need it. “We then take that information and use it to construct separate and ‘fire-walled’ investment portfolios. The result is that the portfolios we constructed for funds needed in the longer term (10 years-plus) are separate from the portfolios constructed for the funds needed in the short term (less than five years). This means that while the long-term portfolios are certainly down this week, their short-term portfolios are holding up extremely well.”

Failla said the message has helped calm clients down.

“We are able to offer our clients a great deal of peace of mind by showing them how the different portfolios are weathering this storm,” Failla said. “So, while no one likes seeing any account down... it is less scary when a client can clearly see the account they are relying on for short-term needs is holding up well.”

Adam D. Van Wie, Van Wie Financial, Jacksonville Beach, Fla., sent messages but they could not stop all clients from moving assets.

“We sent out a preemptive email on Monday morning before the open, and are working on a second communication to go out today [Thursday]. In general, we are advising them to stay the course and not panic, although we have had several clients reduce their stock holdings this week.”

But not all clients were panicking when they called. In fact, some were quite the opposite.

Trevor Scotto, Fiduciary Financial Group, Walnut Creek, Calif., said, “I've had a couple of clients reach out asking if now was a good time to put money into the market after I sent a preemptive email calming clients.”

Steven A. Morelli is editor-in-chief for AdvisorNews. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at smorelli@adnewsfeedback.com.

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