Consultant view: Engaging times for growing a reputation

In times of economic uncertainty, achieving the status of trusted adviser means being proactive in communicating with clients and keeping their focus on their long-term financial plans, writes Steve Bowden of Pivotal Consulting.

Having been immersed in an environment of steadily increasing returns driven by sustained bull markets, most investors have had their confidence well and truly shattered as the global financial system came crashing down around them.

There can be little doubt that this latest period of global economic uncertainty and sustained market volatility has created a challenging environment for advisers and clients alike.

However, it is precisely during times like these that financial planners have an ideal opportunity to capitalise on the value of service they provide, build stronger and deeper relationships with their clients and grow the reputation of their business.

During periods of uncertainty, clients need their advisers more than ever. Without professional advice, clients may become increasingly susceptible to the white noise of opinion generated from a vast array of sources. They can fall victim to the typically irrational investor behaviour traits of feeling compelled to crystallise current portfolio losses in a bid to avoid further falls in the markets in favour of the more traditional safe haven of cash, generally without giving due consideration to the needs and objectives of their longer term financial plans.

Engage with your clients

The key is to engage proactively in the management of a client’s behaviour through close contact and effective regular communication. In a study by Prince & Associates following the 1997 market correction, it found less than one in five advisers proactively contacted their clients in the aftermath, favouring instead a fire-fighting, reactionary strategy (High-net-worth psychology: finding, winning and keeping affluent investors, High-net-worth Press, 1999). I suspect many advisers are keeping their heads down this time too.

Best practice calls for a client-centric approach whereby contact management forms part of the overall client relationship management strategy. Good contact management is effective because the changing needs, desires, hopes and fears of the client are well understood and so the appropriate response or solution can be specifically tailored to the individual, taking account of as many of their characteristics as possible. This is not achievable with a generic client email or letter.

Effective relationship management can only develop and be sustained if, as in any relationship, there is a mutual benefit and value. To be sustainable, relationship management must be based on symbiosis. This term is borrowed from biology and refers to two organisms co-existing and interdependent, and it makes good sense in any environment. In turbulent times in particular, this approach helps to grow the client’s perception of adviser value, engenders loyalty and encourages referrals.

The key steps to effective client relationship management in troubled markets are:

1. Manage your clients’ expectations

Contact your clients to discuss their views about what is happening in this period of global economic correction and explore their concerns. Remind and reassure them of the long-term nature of financial planning and offer a relative perspective of short-term market movements in relation to the longer term growth objectives of their financial plan.