Bowen, founder and CEO of CEG Worldwide, previously worked as a financial advisor and firm executive. He served successively as CEO of Reinhardt Werba Bowen Advisory Services and Assante Capital Management.

Can We Talk?

The volatility in the financial markets this year has been dizzying, with the Dow Jones Industrial Average repeatedly soaring and diving by hundreds of points. These huge swings have certainly created a great deal of anxiety for many advisors and clients. Yet they also present an excellent way for you to improve your business.

It's simple: Call your clients. Reaching out to clients and communicating with them during periods of intense market volatility is an absolutely essential-and effective-way to differentiate yourself from other advisors and win the loyalty of your clients. As you'll see, it can have a huge impact on your bottom line.

Staying Client-Centric
If all the recent volatility has become nerve-wracking to you, imagine how your clients feel. If they don't receive the benefit of your knowledge, experience and perspective, it could become even harder for them to hold on during periods of intense volatility. For this reason, it has never been more important for you to be in close communication with your clients. They are depending on your guidance and leadership to see them through the turbulence.

Volatility in the market also presents you with an opportunity to expand your business dramatically—if you can help your clients meet the challenges. The difference between advisors who excel during difficult times and those who suffer a decline in their businesses lies in how well they lead and communicate with their clients. Client-centric advisors will bring in new assets simply by doing the right thing by their clients. In fact, client-centric advisors may well remember these times as some of the best in their careers.

Client-centric advisors focus on developing their client relationships and do not let investments take priority over relationships (which is not to say that they are unconcerned with investments; in fact, client-centric advisors often have substantial skills in the investment process). They meet regularly with clients and respond to their inquiries immediately.

According to our research, client-centric advisors are a relatively rare breed, making up only 13.8% of all advisors. The remaining 86.2% are investment-centric. Investment-centric advisors tend to be more technically oriented; they focus on developing investment strategies, structuring portfolios, analyzing risk and ensuring that they have the best investment program for clients.

Historically, the differences between the two groups have translated into different outcomes for advisors. It's often helpful to review past events to identify trends you can leverage today. One study done during the spring of 2001-when the market was in the depths of the tech-stock meltdown-examined how each type of advisor fared over the previous six months in four areas: new clients, average assets from each of those new clients, number of existing clients providing additional assets and the average amount of additional assets.

As seen in "Making Contact," next page, client-centric advisors experienced substantially better outcomes in every area. In all, client-centric advisors garnered nearly $2.3 million in additional assets during late 2000 and early 2001. In sharp contrast, their investment-centric peers brought in just $76,700 in additional assets. The reward for advisors who focused their attention on their clients during a rough period in the market? Almost 30 times more new assets.

The message is clear: When advisors are there for clients in meaningful ways, the clients take notice. The result is more business from those clients and a huge competitive edge.

This conclusion is reinforced when we examine the difference between true wealth managers using a consultative process and investment generalists who take the traditional transactional approach with clients. Wealth managers contact each of their top 20 clients an average of 15.4 times a year, according to the latest CEG Worldwide research. Meanwhile, investment generalists contact their best clients just 5.6 times a year on average. That's one big reason why the typical wealth manager earns $881,000 a year-while the average investment generalist earns only $279,000 annually.

Make the Call
Clearly the best response to difficult times is to increase client contact. The next step is to think through exactly how to make those reassuring calls.

First, plan to call the top 20% of your clients and then move on down the list. For your largest clients, or those who will need the most reassurance, a face-to-face visit may make sense. Also, don't speak only with your most active clients. Those with long-term, buy-and-hold strategies in place will be just as worried as more active clients, and they need to hear from you as well.

Second, create some talking points. Get a good read on what's happening by touching base with your institutional partners or economists, analysts or money managers. Then reinforce the validity of a long-term perspective and demonstrate the historical recovery of the markets after periods of unrest. While you cannot anticipate the direction of the markets in the short run, you can provide your clients with a valuable historical perspective. It's helpful for them to know that the usual market movement following past events has been an initial drop followed by a fairly rapid recovery.

For example, the average length of up markets since 1947 has been 45 months, compared with just 11 months for down markets. And the average up market saw a total return in the S&P 500 of 138%, versus an average loss of just 22% in the down months. This type of information should help reinforce your clients' confidence in the U.S. financial system and capital markets.

In many cases, your clients will simply want reassurance that things will be all right. Remind them that they are in it for the long haul, and even if their accounts have lost value, they are doing fine and are well on the way to meeting their long-term goals. Advise them to continue the disciplined investment strategy they have in place and only consider altering it if they've experienced changes in their personal financial situations. Most clients won't ask a lot of questions, and most of these phone calls will be relatively short. The key point here is to reassure your clients emotionally.

By the end of the call or visit, make sure to move off the topic of the recent market environment. Ask your clients if their families are in good health, how their kids are doing in school, whether they have followed up on getting their wills in order and so on. Clients want you to care about more than their bottom lines. They want to feel that they are building a strong interpersonal relationship with you, especially when the markets aren't behaving well.

For example, in CEG's recent research, advisors contact "loyal" clients an average of 24.1 times a year-on non-investment matters. In contrast, advisors contact "moderately satisfied" clients about non-investment matters an average of just 0.6 times. By being reassuring and expressing a genuine interest in your clients' lives, you'll win their loyalty-and more of their business.

Finally, make these contacts a priority and set aside the necessary time. If it comes down to blocking out a few hours a day to get these calls in, then that's what you need to do. Also make sure that you and your staff are prepared to answer calls in real time in case there is a calamitous market drop or news event.

The upshot: Nothing is more important than the relationships you maintain with your clients. So when you call your clients during a volatile period-not if you call them, but when-the key idea to get across is not your concern about how their accounts are doing, but about how they, as people, are doing. By checking in and touching on these important issues, you will put yourself in a position to gather more assets, reassure clients and become the trusted advisor they need.

Reprinted from: Financial Planning