5 Critical Ways to Build a Moat Around Your Clients During Market Uncertainty

Volatility has increased markedly in markets over the last few weeks, and in periods of uncertainty Advisors have a monster opportunity to demonstrate their true value. This is when your clients seek your most authentic and sincere advice. The truth is that in periods of certainty many Advisors are either confused or scared and simply do not reach out to client to offer needed solace. Experienced Advisors are aware of this fact and can truly exercise their strengths to clients and prospects as well.

  • You Must Communicate with Your Clients, do it with Urgency and with a Compelling Message. Each day your clients are being bombarded with play by play coverage of what is happening around the world, remember in this world of social media, news travels instantly. Whether it’s politics, entertainment, the economy, or stock markets, your clients are tied in to Twitter, Facebook, LinkedIn, Reddit etc. And often the negative news get the most play, well, because that’s what gets people’s attention. So you need to craft a message of your own, your message must be consistent, compelling and sensible. You must address the primary concerns of your clients at all times, don’t just re-circulate messages from other fund managers or experts, they all have a motive behind their messages. You must be your own voice to your client, your motive is to provide the highest level of service to your clients, and in times of uncertainty they anxiously await your analysis of the situation, your advice and your guidance.


  • Do what is in the best interest of your client. Put yourself in your client’s place, and be cognizant of the fact and every situation will require a different approach, try to analyse and quantify how each of your clients are being impacted by the market correction. Remember not every client should stay invested at all times, some of your clients are solely dependent on their investments/retirement funds to live on during retirement, they probably can’t handle too much draw-down. Most people simply don’t like to lose money, so it important to acertain every client’s situation separately and do what is right for them.


  • When in doubt “Err on the Side of Caution”.  As an Advisor you have a fiduciary duty to your clients. With this, your responsibility lies in assisting your clients to reach their financial goals, perhaps they look to you to guide them to stay on the right path so that their their life’s savings outlast them without compromise through their retirement year. Are you truly fulfilling your duty as a fiduciary or are a making market call without true merit! There have been many studies over the years that suggests it is sensible to stay invested through market corrections as historically markets have always bounced back and most often recover and move pass former high levels. All of this is great if you time frame is 100 years, but you must put each of your client’s situation in perspective. Consider the actual impact and whether they individually have the time, financial capacity to withstand anything greater than a 10% correction. Keep in mind that for institutional investors or fund managers, there is an inherent bias on why they would be more inclined to encourage their investors to stay invested. Let’s take a Equity Fund Manager as a example, most Equity Fund mandates requires the manager to remain invested in Equities at a minimum of 85% of their exposures at all times. This would suggest that if markets continue to go lower there is a high probability the manager’s Equity mandate will suffer proportionately. Knowing this fact, this manager still does not have any incentives to suggested to their investors to sell their fund, because doing that will mean their fund would shrink even faster during market corrections and the manager will simply be out of work. A double negative, redemption and tanking marketing would be disastrous for any fund manager.  As an Advisor, you do have have the same restrictions, often if you are uncertain of the cause of weakness in markets or potential extent of a correction, you must act in the best interest of your clients. So this is why it is so important to be having active dialogues your client, this would allow you to further gauge their levels of discomfort and be in a position to act promptly to reduce risk should the client require this. Be mindful that these people have worked their entire lives to create a nest egg and they would do everything in their power to protect it and you should too, that is what they are paying you for – risk management!


  • This is a good time to take stock of your investment approach for every one your clients. Over the last few years, there’s been a turn away from owning individual shares to owning ETFs, these have offered Advisors tremendous opportunities to management risk in client portfolios. However, at the same time, many manufacturers that have jumped on the bandwagon have created some dubious less understood products that have been marketed as risk management tools as well. Advisors have no shortage of risk management tools at their disposal, whether in using managed products, ETFs, options or even insurance products to manage risk.  That said it is still important to do your research and build your knowledge around these tools before using them. It doesn’t have to be complicated, what it must be is the right approach for the client. So take some time to review your approach and your risk management tools and determine the actual value added from these investment tool and also whether its right for you and your clients. Don’t get caught up in the Hype!
  • Be helpful to Your Client’s Circle of Friends and Aggressively Market yourself to Prospects. Like your clients, their friends may be desperately seeking Advice right now too. Furthermore, there’s a high probability that their colleagues have an Advisor who is not communicating with them effectively in this high stress environment. This is your grand opportunity to grow your practice, there are many Advisors who are simply complacent, they believe that market corrections are simply a blip in time and things will bounce back and clients will be ok. The reality is that given market valuations, and the current geopolitical environment, no one knows with any certainty where the markets are going and the severity of this or any market correction. Your advantage is that by talking to the people whose Advisors are complacent, you have an opportunity to showcase substantial value, empathy and meaningful solutions. You will have their attention and they will actually listen to your solutions. Your probability of closing new business during periods of uncertainty can be huge.
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