These days, a lot of people are concerned — if not outright worried — about the state of their investments and the economy, overall. Understandably, there’s an atmosphere of stress in the United States. Financial advisors may be in a tough position, especially when there’s less-than-optimistic news to deliver.
In a tough economic climate, your superpower as a financial advisor is your ability to proactively address and resolve your clients’ concerns.
“Today’s crisis of confidence in the U.S. banking system is yet another opportunity for advisors to demonstrate the power of the independent model,” writes David DeVoe, a San Francisco-based financial services consulting firm specializing in business strategy, mergers and acquisitions, succession planning and valuations for RIAs.
“Advisors who serve their clients well during this time, and follow up with appropriate engagement, will be rewarded with a surge of growth that nearly always follows a crisis.”
Here’s how financial advisors can be a force of optimism during challenging economic times.
1. Adopt a mindset that welcomes change
Change is the only true constant in this world.
For the last half-century or so, Americans have enjoyed a degree of predictability when it comes to the rules that define the economy. But now, a range of demographic factors are contributing to change. To name a few, these societal shifts include war and the need for reconstruction in Ukraine, younger generations becoming the dominant economic force in the United States, the acceleration of artificial intelligence, climate-related changes, and a growing global population.
The financial system, itself, has shifted as well. Consider the number of mutual funds a benchmark. Back in the 1950s, following the first and second World Wars, there were only 100 mutual funds. As of 2021, there were roughly 7,500.
There are other signals pointing to change in the financial markets, overall. Consider this study about how commodities fit into clients’ portfolios, authored by two James Madison University professors and published in the Journal of Financial Planning back in October 2022.
“Since 2005, return correlation between the Bloomberg Commodities Index and the S&P 500 has been 49 percent, compared to –30 percent 1973–2004,” write professors Jason D. Fink and Kristin E. Fink. “This change has significantly reduced the ability of commodities to contribute to an efficient portfolio in a modern portfolio theory framework.”
In other words, the rules of the past are no longer the rules of the present and future. Adaptation is the new frontier of success as a financial advisor.
2. Become an expert communicator
Communication isn’t just answering questions and picking up the phone. There’s an art to it, which begins with listening closely to investors’ needs and concerns. In fact, you may find that some of the best communication happens without the need for talking (or typing) at all.
For instance, Pat Hehir, a partner at Princeton Financial Partners, starts his mornings by logging into CircleBlack to review assets over the previous few days, to see if any accounts were more volatile than others. He also double checks which clients have been logging into Princeton Financial Partners’ branded app as a sign for who might be feeling nervous.
“This data tells me whether I should be reaching out to clients to be more proactive,” he says. “We can quickly get on the same page by looking at the same data in CircleBlack.”
In our fast-paced modern society, communication often happens by connecting multiple parties to information, through networks of software integrations.
As an example, Hehir uses Riskalyze to capture responses to survey questions, in addition to MoneyGuide for goal planning. Hehir also relies upon CircleBlack’s integration with Redtail to maintain an integrated view of every clients’ needs.
This technology communication enables greater collaboration firm-wide within Princeton Financial Partners, as all four advisors at the firm have a shared basis of understanding. With this collaborative understanding, financial advisors can better respond to the needs of each investor.
3. Be ready to meet the conversational moment
Apart from being able to communicate what’s going on with clients’ portfolios, it’s important to be ready to answer questions that come up. That means having key data readily available and easily accessible.
“I like to get to the bottom of what’s smoke and what’s not — to focus on what’s real — when putting together the puzzle of clients’ investment plans,” explains Kevin Andrews, founder at Eagle Financial Group. “I try to know my little corner of the world better than anybody else.”
“I feel like we’re counselors or psychologists most days,” he elaborates. “The market challenges that we’re seeing these days are unique. We’ve been under pressure to put on our economist hats and respond accordingly. It’s more than planning. There’s so much data in our world, and our clients expect us to know every detail.”
A key strategy for Andrews has been to use a financial advisory platform as the centerpiece for every client meeting.
“We start with a shared view before going off on tangents,” he says.
That shared view needs to be easy to understand, interpret, evaluate, and act upon. Moreover, this frame of reference should align your clients with your perspective. The goal is for everyone to get on the same page to prevent the potential for miscommunication.
4. Embrace your role as an educator
During times of economic confusion, stress, or volatility, it’s understandable that people are seeking guidance from trustworthy experts. As a financial professional, it’s important to recognize that your wisdom is a grounding force.
From unexpected mass layoffs to bank failures, rising interest rates, and stagnating wages, a lot of Americans are unsure of what their economic future holds. With so much change happening quickly, investors may be stuck in a reactive mindset.
Financial investors need tools to reorient this thinking — to move into a more proactive stance. That means offering expertise as a teacher. The first lesson to share with clients?
It’s that nobody can predict the future performance of an investment.
What advisors can do; however, is to provide guidance and manage expectations. That means taking the following steps:
- Sharing trends about the market that may be relevant to your clients’ portfolios
- Communicating updates pertaining to legislation in a timely manner
- Preparing and sending over reporting before your clients have a chance to ask for it
- Bringing issues to your clients’ attention before they have a chance to notice potential problems
- Demonstrating an awareness of the overall economy
- Clearly articulating investment strategies and methodologies, to ensure that clients aren’t surprised by results
If you’re looking for more suggestions for managing communications with clients, take a look at this framework that the CircleBlack team previously published here.
One of the cornerstones of ancient stoic philosophy is that we can’t control the external world — we can only focus our own thoughts, intentions, and actions. Sometimes, it’s hard for people to remember this foundational and timeless thinking. But learning to embrace it makes all the difference in our modern world.
CircleBlack is an all-in-one technology platform for relationship-focused financial advisors. To learn how our software can help you build, manage, and grow your wealth management practice, get in touch to request a demo.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal, or tax advice.