Winter is Coming: 5 Ways to Prepare Your Clients

September 18, 2016 Winter is coming

“Winter is coming” is the motto of House Stark – one of the great houses in Game of Thrones. The words are a reminder of the need for constant vigilance and preparation because, regardless of how “sunny” life has been, there will always be tough “winter” periods that need to be dealt with.

The Modern Adviser remembers the Global Financial Crisis of 2007 and the Tech Wreck of 2000 and understands that clients need to be prepared for the inevitable next share market correction. Here are 5 ways to prepare your clients and protect your practice from the perfect winter storm of opt-outs and Fee Disclosure Statement mania.

  1. Be clear about what you can and can’t control – clients who see you as their investment expert may have an unrealistic perception of the power you have in the investment market, your ability to predict corrections and therefore steer their portfolios away from danger. Your next review would be a great time to have that discussion and reconfirm your clients understanding of your role in their investments. Beware the urge to accept praise for outperformance as you will also have to take blame for underperformance.
  2. Communicate realistic outcomes –Take advantage of the outperforming years to talk about the long term nature of investing and the average rates of expected returns. This is a conversation that comes easy when there has been a substantial rise in the portfolio and can then be related back to the client in an underperforming year. The use of share-market history graphs are a good way of doing this as the volatility is shown visually.
  3. Discuss what can go wrong with investments – most strategies have an element of risk and clients need to understand what risks are associated with their investment strategies. Just focussing on the expected upside may get the client to accept the strategy in the short term but they won’t thank you for surprises later that weren’t explained. Modelling software allows you to show the impact of changing variables on a strategy such as interest rate rises, lower capital gains or lower income yields.
  4. Ensure client buy-in – take the time to explain the long term nature of any investments and relate them to the client’s goals. This will ensure that the client shares the ownership and responsibility for their investment decision. A client that does not “own” their investment decision will be quick to blame you as their adviser when things go wrong, redeem their investment and accept their losses (to their detriment). The alternative is a client that has been educated and empowered to “own” the investment strategy, remains a client and achieves their long term goals.
  5. Broaden the scope of your service – financial planning is not just about investments and insurance. Review meetings are the time where you can position your entire service offering and find other ways that you can help your client. Assisting with Debt re-structuring, Cash flow management, Estate Planning, Tax reduction and Structures are all part of the tools at your disposal and need to be explored before the next correction. The review meeting is the best time to discuss these issue with your client and to re-position yourself and your practice in the client’s mind.

The Modern Adviser is preparing now for the next share-market correction or period of slow growth and is using online modelling calculators and visual tools to improve their client engagement process and introduce new aspects of financial planning to their clients….Winter is coming.

Hans Egger is Co-founder and managing director of AstuteWheel Client Engager, Financial Planning Software and Estate Planning Software and admin of The Modern Adviser

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