Handling statement shock

When your clients look at their next portfolio statement, the numbers aren’t going to be pretty. And even though they’ve heard the litany of bad news, when they see it, the reality of the steep declines will hit home.

So how should you handle this statement shock?

One of the smartest approaches is to provide a safe forum for your clients to express how they feel. You can do this by proactively calling your best clients and having a discussion either in person or on the phone.

Yes, this may take time away from other business objectives, but it’s absolutely worth it. Indeed, these days, you should be dedicating more time than ever to personal client service.

Many advisors often try to jump right into providing a solution or solving the client problem. But this can cause a breakdown in communication if you don’t really know the clients’ underlying objection, which wastes everyone’s time.

A better method is to use a consultative interview approach to handle concerns. Here is a five-step process from the Forum sales system that offers useful tips.

1. Encourage clients to talk about their concerns.

Start up the conversation by asking a question like, “I know you have just received your year-end statement — how are you feeling about it?” If clients have concerns, by asking this question, you are showing that you care and are not minimizing their concerns. On the flip side, you may find some clients do not have a concern and are aware that the best action in the majority of cases is to hold tight.

2. Ask questions to clarify their issues.

You could say things like, “Tell me more,” or “What is most concerning about this for you?” For instance, you may find that the underlying concern is not the declines, but rather that clients may be facing a layoff at work.

3. Confirm that you fully understand their situation.

Paraphrase back to clients what they have expressed to you and make sure you understand before moving on.

4. Provide them with a thoughtful response.

In many cases, your clients’ reaction to their current portfolio losses will be a real complaint. The best response to this issue is to show them real action. Invite them to review their financial plan and see if changes need to be made. Perhaps you need to review more conservative options.

Clients may also be feeling skeptical. For example, perhaps their perception is that you and your money managers have not been actively managing the portfolio, when in fact, you have done so diligently. In this case, the correct response is to review your process with them and provide statistics to help alleviate their concerns.

If clients’ concerns are real drawbacks, such as they are not going to be on track to reach their retirement goals, then you need to determine the best course of action for them. What adjustments will need to be made either to the portfolio or to their risk profile? Should an increase in savings or a decrease in expenditures be the appropriate approach? You need to work with them to keep their plans on track.

Alternatively, there may be a misconception. For example, perhaps they think their portfolio has dropped more than the average. You may have clients who have experienced a 20% loss, while the market has dropped more than 30%. In such a scenario, putting their portfolio in context should help ease their concerns.

5. Ensure you have alleviated their concerns.

After a thorough talk, make your clients feel that you have done your part to alleviate their concerns. Ask them, “Has this been helpful?” or “How are you feeling now?” If they are still feeling as concerned as when you started, you may have to schedule another meeting or go over all the issues again.

Also, don’t forget to position yourself as a resource to others they may know that need reassurance or a second opinion on their portfolios.

In times like these, consider going above and beyond the advisor call-of-duty. For instance, help your clients deal with their bad returns with some real-life coping strategies.

The best piece of advice: tell clients to stay calm and not to panic sell. Absolutely, the numbers are gloomy, but many recessions have occurred in the past and each time, the markets roared back with positive overall returns. In terms of the numbers, since 1957, the stock market has enjoyed a positive calendar year return in nearly three out of every four years.

You should also be encouraging clients to turn this challenge into an opportunity. Deal with the stress by engaging in healthy activities like walking, spending time with family and making lifestyles changes, from eating better to smarter spending.

Whether you offer them coping tips on the phone, in a newsletter or in person, they will appreciate it and may even refer people your way because you took the time to help.

And these coping tips aren’t just for your clients — they are for you, too! If you look after yourself, you’ll have the gusto to help your clients handle statement shock and much more.

April-Lynn Levitt is a Calgary-based coach, and Kim Poulin is a Montreal-based coach. They provide one-on-one customized coaching to financial advisors.

(02/02/09)