Friday, April 04, 2008

"Weathering the Downturn—with Good Communication"

I agree with the communications advice offered below. Thank you, Beverly Flaxington of The Collaborative for giving me permission to reproduce your article here.

Yes, it seems we are officially in a recession. Portfolios are shrinking—and fast. One never knows what the next day will bring in terms of rate cuts, market performance or the political climate.

What's a financial firm to do? Most people think they need to "batten down the hatches" right now. They hunker down and wish and wait for things to change. They worry about getting client calls. They worry about cutting the budget and they worry about shrinking fees tied to portfolio assets.

We've been through this before. What goes up, must come down and once it comes down, it usually goes back up again. We have historical perspective that says "this too shall pass." So, how to behave when the market isn't?

If it isn't your style to communicate when things are going well—now is not the time to stay in your style. Find reasons to reach out to your clients. Help them understand what's going on. If you are feeling concerned about market turbulence, think about the less informed client—it's a real scare to think you won’t be able to retire on time or send your kid to college next year.

If it is your style to communicate, make sure it is largely educational. Don't feel you have to justify your market-related poor returns. Explain to clients what is happening—in historical context explain what you are seeing in the market and what you are doing. Explain why you are making the investments you are and what you think clients can expect as a result. Show the clients you do have a plan and an approach. Clients know you can't control the markets, but they need to know you have a plan to deal with the volatility.

If your style performs well in a down market—tout it, loudly! We all like upside and seeing our portfolios grow, but firms that manage downside risk well look great in a down market. If you are one of them, take advantage of the timing!

Help clients think through timing. Is now the best time to begin retirement? Should they wait a bit longer? Should they look for the second home right now and take advantage of the market earlier than they planned? Should they put some other major purchases on hold? Be their partner—work with them to figure out how to manage in this environment. The down markets certainly shrink portfolios but they also provide opportunities for those willing to act on them!

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