4 Smart Strategies for Keeping Client Anxiety at Bay

Published by Craig Iskowitz, CEO and Founder of Ezra Group, LLC
November 3rd, 2016

anxiety“If information was the answer then we’d all be billionaires with perfect abs.”  — Derek Sivers

It’s clear that our clients are overwhelmed with information. From talking heads on CNBC to friends and neighbors to the myriad of financial websites, there is a constant stream of advice being broadcast to your clients every day. That information overload, combined with the human impulse to chase the latest headlines, can have a negative impact on investment results. 

Most advsors believe that thoughtful analysis and solid investment recommendations should be major determinants of client success. While it would be easy for advisors to think that given their decades of experience and training, the reality is not so simple. No matter how carefully you construct a client’s portfolio or how detailed the quarterly performance report you provide, it can all be undone in a single moment of panic, fear or greed on the part of your client. 

There is no nice way to say this, but left to their own devices most clients make terrible investment decisions. Advisors can point to multiple war stories of a crisis wrought or nearly averted because a client overreacted to a market bump. Studies like Dalbar’s annual Quantitative Analysis of Investor Behavior confirm what advisors intuitively know: an average investor consistently underperforms the market by a wide margin. Why does this happen? Brain wiring is to blame. 

Behavioral Bias Leads to Poor Decisionsgraphic

The Investor Psychology Cycle illustration highlights the typical thought pattern of optimism and excitement in good times, followed by dejection and panic when the market drops. While those emotions are valid, irrational actions that are based on them can do considerable damage. Human tendencies for loss aversion, mental accounting, ungrounded optimism, and herding can all cause investors to buy or sell at the worst possible times. It can often take years to reverse the consequences of these decisions. In the meanwhile, the emotional roller-coaster of the market will continue to present fresh opportunities to add new mistakes to the pile. 

The challenge facing many advisors is structuring client communication in a way that will reinforce positive behaviors and discourage poor decisions. 

The good new is that advisors now have more tools to manage the human aspects of investing and create better outcomes for clients. Preliminary discussion of risk and strategy is useful, but it’s the just-in-time outreach and coaching that can keep clients from panicking and making bad decisions during a stressful time. Here is the blueprint for keeping client anxiety at bay. 

Begin With the Big Picture

Brilliant investment choices and portfolio strategies are great, but helping clients build constructive investing patterns is what counts most. Start with big goals, and then break them down into smaller actionable steps. Help clients track progress – client portals and real-time performance reports can boost motivation and engagement. 

Automate Client Check Inscalendar-graphic

Setting up a schedule for regular interactions with clients can help reduce their anxiety level, since they know you are available when they need you. A number of automated tools are available to allow advisors to keep a hand on the pulse of the client’s comfort level. 

One application sends an automated email to selected clients on a pre-determined schedule to answer two short questions: “How are you feeling about the markets?” and “How are you feeling about your financial future?”

With a few quick taps on a smart phone or tablet, the client can review a real-time snapshot that illustrates normal volatility for his or her portfolio. If the client reports a heightened level of anxiety or stress about the markets, the advisor gets a notification to reach out with personalized guidance and just-in-time coaching. Tools like this have the potential to streamline and simplify regular client interactions, giving advisors clear and timely guidance on who needs a personal touch. 

Maintain Client Engagement

No matter what happens with the market index on a given week, staying in touch with clients and prospects is always relevant. While social media outlets like LinkedIn, Facebook, Twitter, and YouTube have given advisors new opportunities to connect, they have also created an overwhelming amount of noise. How can advisors get their message out and cut through the clutter?

Social media content curation tools like Grapevine6 can help advisors stay in touch with clients and prospects via a highly relevant stream of shared articles. Grapevine6 was built to simplify content sharing and improve engagement. The platform’s algorithm tracks the engagement and interaction with content, and recommends new articles based on past history. The visual interests map allows advisors to tweak and curate their online presence to match their brand message. 

Learn New Coaching Techniquesclient-emotions

Advisors are in a unique position when it comes to their ability to help manage client emotions and behavior. Money conversations are inherently difficult, and many clients do not have anyone else to turn to when they need to voice their anxiety or concerns. Those conversations have the opportunity to build stronger relationships and help clients stay the course. 

Carl Richards of the Behavior Gap, a training program for financial advisors, has a video mini-series on managing client emotions and behavior in what he refers to as “scary market.” Some of the techniques Richards recommends are grounding clients in their goals, helping them create thinking space, and validating their feels. In his experience, reminding clients why the strategy was chosen and giving them the opportunity to verbally process their fear can be effective in preventing rash decisions. Advisors may choose to be proactive and include reminders about goals, investing strategy choices and reasonable expectations during the downturn in their newsletters, client emails, video blogs and articles. 

Leveraging Technology to Extend Your Reach

As a wealth manager, your greatest value and opportunity for impact lies in your ability to coach your clients to build constructive habits and make better financial decisions. Technology can help by facilitating targeted just-in-time outreach and reducing the time it takes to stay in touch. 

No matter which tools you select to support your efforts, keep in mind that consistency is the key to success. The key is to deliver value to clients in a way that supports their long-term goals. This is a badge of honor for every successful financial advisor. 

About the Author: Craig Iskowitz is CEO and founder of Ezra Group, LLC, located in East Brunswick, NJ. Ezra Group is a management consulting firm providing advice to the financial services industry on business and technology strategy, software development, and marketing. Craig has over 20 years of experience in wealth management, retail and institutional brokerage, market data and front and middle office operations. He previously worked for ADP Brokerage Services (now Broadridge Financial) for almost 10 years before becoming a consultant. His clients include many Fortune 500 firms such as The Bank of New York, Fiserv, Standard & Poor’s, and J.P. Morgan Chase. Craig is also the editor and publisher of the Wealth Management Today blog (www.wmtoday.com), which focuses on news and information for the wealth management industry with focus on fee-based advisory platforms. Craig is also available to speak on wealth management trends, participate in industry panels, or present one of his industry classes such as, Managed Accounts 101. Craig can be reached at craig@ezragroupllc.com

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