Blogs - The Referral Doctor
Retaining Clients When Markets Fall
Monday, November 12, 2012
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The fiscal cliff. Deteriorating fundamentals. Volatility. Is the market about to fall? I have no idea. But we know it is just a matter of time. How will you keep your clients happy when the next bear market comes?

If the focus of your practice is investments, you have a challenge. You can only go so far with "we are losing less than the market." Especially if you, like many advisors, like to talk about giving your clients “peace of mind.”

One of the challenges of working with a client whose portfolio is declining is the fear. Talking about the numbers is a rational thinking process. But fear is emotional. Numbers is about the brain; fear is about the heart (or stomach). Back in 2009, near the end of the last really bad bear market, Bob Curtis, president of the company that produces MoneyGuide Pro, described the problem brilliantly. He said that people were not terrified because their retirement portfolios had declined in value, but because they were scared they would have to eat cat food in their golden years. That is not an issue you can address with the knowledge that you are losing less than everyone else.

Julie Littlechild, CEO and Founder of Advisor Impact, has demonstrated that the most loyal and engaged client relationships are characterized by going beyond the portfolio, among other things. Most commonly this means financial planning. Curtis’ answer to the client fears of the last big downturn was to update people's financial plans to show them not what the portfolio value will return but the probability of hitting the original retirement income target.

Even more powerful is addressing the other particular needs of your niche market. If you solve a problem for a niche using a skill most advisors don't have, you lock those relationships in. If your clients came to you because of their challenges with specialized planning, tax, estate, risk management, or even nonfinancial issues then they will still need you regardless of whether the market is going up or down.

This is the kind of feedback I hear all the time in client advisory boards. When we ask the question "what are the most valuable things your advisor does for you" it is rarely "provides me a great return on my portfolio." And when it is, we recognize it as a red flag. Much more common are responses like the advisor gets involved with our family, the advisor helps us work through complicated issues, or the advisor helps us make the right decisions.

One advisory board of business owners was particularly memorable. In response to the "what's important" question one participant jumped in with "don't come talk to me asking to manage my money. The most valuable thing you do for me is help me coordinate all the complicated issues between my other advisors. You do that for me and you'll get my money."

By the way, focusing on a special (non-portfolio) issue of your niche market will set you apart from other advisors and give people a reason to refer you in good markets and bad.

Broaden your relationship with your clients. Identify the unique challenges your niche market faces and the next bear market, whenever it may come, will be a lot less of an issue.

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