The downturn of the past year has had a profound effect on how financial advisers are managing client behavior and expectations. As a result of the financial crisis and the
recession, advisers said, they are communicating with clients more frequently and placing greater emphasis on
financial planning and risk.
“We are actively reaching out to clients on a much more regular basis, even if it's just to check in,” said Boris Blum, president and chief executive of Wealth Planning and Management Inc., which has about $100 million in assets under advisement.
“They need to know that we are there, paying attention, and that we care,” Mr. Blum said. “We are making sure they understand that this will pass and that as long as they focus on their long-term objectives and are actively engaged, we will weather this storm together.”
“There's definitely much more hand-holding,” said Jonathan Davis, a managing director with Lenox Advisors Inc., which manages about $1.5 billion in assets.
“We've gone back to basics, with an emphasis on long-term goals like retirement and education,” he said, noting: “The paradigm for risk has changed for many clients.”
“There's been a flight to safety in the form of Treasury bills and cash. We've had to get back to clients to manage their expectations and re-educate them about what kinds of nominal risk they may be willing to accept now that the economy has become more predictable and stable. But the days of clients' focusing on long-only equity portfolios are gone,” he said.
It has become critical for advisers to “be more than just an investment adviser,” said William Baldwin, the new chairman of the National Association of Personal Financial Advisors.
“We've tried to manage clients' behavior by increased communication with clients and explaining the value of what we're doing,” said Mr. Baldwin, who also is president of Pillar Financial Advisors Inc., which manages $600 million in assets.
Financial planning “at all levels” is also being emphasized, he said.
Joni Youngwirth, managing principal of practice management for Commonwealth Financial Network, agrees. “Currently, client expectations are fairly grounded, given the uncertainty of the last 18 months,” she said.
“Going forward, savvy advisers may notice performance "expectation creep' in their clients. To counter this, advisers should stay focused on financial planning and consistently reinforce client goals,” Ms. Youngwirth said.
In addition, advisers need to manage their expectations of themselves, she said.
“In some cases, advisers have discovered — and have had to accept — that they are not miracle workers and cannot always be heroes to their clients,” Ms. Youngwirth said.
E-mail Charles Paikert at [email protected].
