At Dimensional, we believe that an advisor can offer valuable guidance and a calming perspective to clients—especially during turbulent times. We have built longstanding relationships with many top advisory firms and recently asked leaders about their message to clients during the COVID-19 crisis.
Here are a few responses:
Start by listening to what clients are actually feeling
Doug Nelson, Advisor and Shareholder, TCI Wealth Advisors
We have been approaching this proactively from the softer side with questions like, “How are you feeling about things right now?” My natural response with clients is to run to the data and use logic to quell their fear, which may inadvertently invalidate their feelings associated with the crisis. If we instead listen to what clients are feeling, we gain clues as to the next steps needed to keep them from making a mistake.
We can’t communicate with clients enough
Jeff Buckner, Founder, Chairman, and Co-Chief Investment Officer, Plancorp
To help provide confidence, we have a lifeboat analysis that shows our clients how long they can live off their portfolio income from cash and short-term bonds before it would be necessary to sell any of their equities. We also assist clients with updates to their financial planning models so they can see that they still can expect to accomplish their goals even though the market and their assets have declined in value.
Cooler heads prevail
Jeff Troutner, Founding Partner and Chief Investment Officer, Equius Partners
True to our nature and history, we did not rush out a letter after the first day of significant market decline. This is consistent with our “cooler heads prevail” attitude, which our clients generally expect. The team got on the phone immediately, however, with newer clients, who may not know us or the approach nearly so well, and called other clients later. As in the past, most of our clients get it and ask how we are doing! We do not pull out models, math, algorithms, theory, or anything like that to assure them that they’ll still meet their goals despite the current market. They know these declines happen in the short run, and we are encouraging them to look optimistically to the market recovery and keep thinking longer term.
The mistake of going to cash
Norm Mindel, Partner, Forum Financial Management
We are sending marketing pieces weekly and have set up a team to deal with clients wanting to go to cash. We have advisors all over the country and are doing weekly meetings to keep them focused. We are also emphasizing the benefits of rebalancing, along with some of the economic positives, such as low oil prices and low mortgage rates. In our most recent communication, we used the financial crisis of 2008–2009 to demonstrate that this has happened before and explain why going to cash was a mistake. I think our next piece will focus on the failure of hedge funds to deal with this crisis. Clients at some point will want to know what is working and why they did not invest in that. This is common thinking when you get to DEFCON 5.
We aren’t reacting to this situation
Jerry Foster, Founder and Chairman of the Board, Foster Group
We sent an email to our clients that reinforced the fact that we aren’t reacting to this situation, but rather, we are implementing procedures that were created and put into place years ago in anticipation of something like this happening. Business continuity planning has been a project we have taken seriously, but it was still an exercise of “what-ifs.” Today it is reality. Our clients need to know that we are on it! The email was delivered with confidence and calm, validating the emotions our clients are feeling. It laid out in detail what we would be doing with meetings already on the calendar, how we would handle new meetings, and what they can expect in terms of communication from us in the coming days and weeks.
Many of our clients don’t worry until they hear from us
Mike Davis, Founder, CEO, and Wealth Advisor, Resource Consulting Group
We prepared a written “Downturn Survival Plan” for every client who came in for regular update meetings over the past two years. This tool looks at their typical annual withdrawal from the portfolio and compares it to the amount they have in fixed income. We want them to have at least five years of withdrawals in fixed income because that is how long it took our equity model portfolio to recover from the global financial crisis of 2008. We then show them three different 10-year periods (two of which include 2008) and what actually happened to the equity portion of their portfolio. There have been many “ahas” from our clients after seeing that report.
Interestingly, many of our clients have said that they don’t worry until they hear from us! They assume we are doing our job with rebalancing and tax loss harvesting and if we call them, things must really be bad. We find that to be the case with clients who have been with us a long time, so we are reaching out to clients who have only been with us a short time.
It’s all hands on deck for clients, but our staff needs the same attention, if not more
Bob Swift, Advisor and Shareholder, TCI Wealth Advisors
Initially, we felt very good about our response to clients, but then we wondered about our staff. What were they thinking about the crisis? So, we brought in beer and wine and held an office meeting we called “beer, wine, and conversation.” Everybody showed up, and we started with the old dogs, who shared their memories of 1987, 9/11, and 2008, and described their anxiety during those times. One staff member, who had just been hired before 2008, told a moving story about how she just knew layoffs would be coming based on what the media was saying, and she would be the first to go. But what actually happened was a shared, no-layoff 10% pay reduction. The recovery and the client growth that occurred enabled us to pay back the reduction along with a good bonus by year-end. More than two-thirds of the room had been hired after her, and you could feel the relief from her story and confirmation that we walk the walk not just with clients, but with staff.
The message learned once again: When chaos hits, it is all hands on deck for clients, but our staff needs the same level of attention, if not more. They are worried more about their jobs than the hit on their portfolio. Sometimes the best learning comes from people other than the leaders.