Financial planners are limited in what they can achieve for clients, but insightful and regular communication is essential when times are tough
A few minutes into the initial meeting with a new client she looked out my office window and proceeded to explain what drove her to make the appointment.
“I’m just sick of having no control; having no say in what goes on with my money.”
She was visibly anxious, her eyes darted around and she fiddled nervously with the documents that she had brought to the appointment. Then she moved on to describe how the value of her sizeable portfolio had haemorrhaged quite badly.
She appeared to be someone who was reluctant to complain; reluctant to make changes lest it cause an affront to another party, but she had clearly reached her tolerance limit.
The portfolio was comprised of seven managed funds within a master trust, which had been savaged by the events of 2008 — and like all portfolios were anything but 100 per cent cash. She said she wanted to know that the people she paid to manage her money were across the issues.
At one point she said: “They keep telling me it’s a long-term thing, but I just don’t know if they really know.”
She was a little shaken by the effort it was taking to make what, for her, must have been the most difficult words of the conversation to that point.
It should be noted that while the anxiety resident in such words perhaps rings true for most investors when markets are heading south with little prospect of a sustained 180 degree turn to the north in the near term, they run counter to the propensity of investors to take their eye off the details when markets are running up hard.
Many people reading this will have had similar experiences with potential clients this year, but I can’t help thinking that for want of better, perhaps more meaningful, communication from her previous financial planner, my meeting with her need not have taken place.
The more intently I listened to her words the more it occurred to me that she should not have found the need to be in my office in the first place.
As a prospective new financial planner, I could offer no guarantees of a quick turnaround in the investment performance. Similarly, I could not even begin to suggest that by engaging my firm to manage her money we would outperform her previous portfolio structure.
In my mind, while we could offer her a different, more personalised, system of portfolio management, a key point of differentiation was that we could perhaps offer her better communication.
Better in the sense that we would be in touch with her much more often and provide more insightful communication about what is happening in the markets and economies and why. Better in the sense that the written communication is generated from my business, as opposed to a large institution’s generic correspondence.
As I continued listening to the new client talk about her lack of control over her investments, I was struck by the similarity of her sentiments to my own experiences over an extremely short period of time a few days before the meeting.
I had been flying home from Sydney to Tamworth on the night a storm cell initiated major flooding in the town and district for the next 24 hours or so.
As a veteran of many such flights, I knew it was going to be an abnormal night when, 15 minutes into a 50-minute flight, the pilot asked the cabin crew to prepare for landing.
As lightning struck what seemed like a million times around us and the plane danced around the night sky for another 45 minutes, we heard not another word — not one — from the pilot until just before the real landing preparations.
As the flight dragged on, I watched those around me in the cabin gradually become more aware that this was no stock-standard Sydney to Tamworth run.
I’m almost certain the discernable, growing anxiousness among many of the passengers could have been greatly eased if only the pilot or first officer had taken 20 seconds to let us know their plan. While they were obviously busy up front, I couldn’t help but wonder why they remained silent.
I suspect that many financial planners will have been silent on the events of 2008, both in terms of preparing clients for the certainty of the downturn and also silent as to how to provide them with an outlook.
While some might correctly argue that trying to provide clients with a definitive outlook for the world’s financial problems is impossible, the point is that clients need to hear from their planner.
In reflecting on 2008, I suspect many planners have lost clients, or at least seriously stretched the limits of their professional relationship with some.
In looking forward to another less than stellar year in 2009, planners must now be endeavouring to shore up their client retention practices. Clients need to know that their planner is at least across what is happening and why.
Financial planners need a wide range of skills in addition to the intellect to be able to understand the behavioural characteristics of economies and investment markets.
But top of the list has to be an ability and propensity to communicate complex economic and financial issues to people. I’ve long been of the view that clients should hear from their financial planner more often when times are tough than when markets are rolling along nicely.
Human beings need contact with each other, especially when fear abounds. Clients need to know that their financial planner is not just closing their eyes, hoping the problems will all go away. For almost the entire year, every print, radio and television news bulletin has featured how bad things are on the financial front.
Mainstream media has struck like lightning at every hint of a financial problem in the world, and will continue to do so for a long time to come. It’s a major task to counterbalance such negative input to clients’ thinking, but counterbalance planners must through communication.
Being in contact with clients is not just a generic letter from head office with an electronic signature.
Real written communication with clients is at least about putting real ink in your signature onto each and every client’s letter. It’s partly about letting them know that you’ve taken the time to at least sign their letter personally.
2008 and 2009 will be the roughest investment ‘flight’ most clients will ever experience and it will be a much longer flight to clean air than perhaps most planners expect.
There will be false dawns aplenty and it will be tempting for planners to placate clients with the hope that each such upward movement is the beginning of the recovery, but that’s fraught with danger.
At my business, we now have a new client when, really, we shouldn’t. We cannot offer her a cure for the financial woes of the world nor can we even begin to suggest that we will do better than her previous planners. But we will keep her informed and we will go to great lengths to carefully set her investment expectations.
I know that deep down she is aware of our limitations, but already she feels more comfortable about the ‘flight path’ ahead because she has been privy to examples of our written communication to clients over the past several years.
I’m almost certain that our new client really doesn’t want to control her investments, much like I had absolutely no desire to fly that plane.
At around 9.05pm on Friday, November 28, my flight skewed left then right and finally lined up with the runway before thumping down at Tamworth Airport.
As the aircraft began to brake, somewhere behind me a passenger uttered his thanks followed by an expletive — somewhat of an understatement of the relief of all on board.
Despite my displeasure at the lack of communication from the cockpit, changing airlines mid-flight wasn’t an option; my fellow passengers and I were a captive audience of the service provider.
Financial planners have no such luxury!
