It's been a rough few weeks for Toyota Motor Corp. what with its recall of some 8 million automobiles due to faulty accelerators. Beyond the recall, Toyota didn't help itself with the way it handled the situation, with critics claiming the company was slow and not overly forthright in its response to the problem. Indeed, the once sterling image of the car maker has taken a shellacking in recent weeks. Lawmakers are probing the recall, consumer groups are angry, and tort lawyers are lining up to launch suits against the company.
While financial advisers may not have to deal with a crisis of this magnitude, they often face problems involving their firms' credibility and reputation. Failing to handle the situation properly can have disastrous results, said Jane Ingalls, founder and president of Artemis Communications, who has coached financial advisory firms on crisis management. “As painful as it is to watch, the Toyota recall offers key lessons on crisis management,” Ms. Ingalls said.
It's been a rough few weeks for Toyota Motor Corp. what with its recall of some 8 million automobiles due to faulty accelerators. Beyond the recall, Toyota didn't help itself with the way it handled the situation, with critics claiming the company was slow and not overly forthright in its response to the problem. Indeed, the once sterling image of the car maker has taken a shellacking in recent weeks. Lawmakers are probing the recall, consumer groups are slamming the , and tort lawyers are queuing up to launch suits against the company.
While financial advisers may not have to deal with a crisis of this magnitude, they often face problems involving their firms' credibility and reputation. Failing to handle the situation properly can have disastrous results, said Jane Ingalls, founder and president of Artemis Communications, who has coached financial advisory firms on crisis management. “As painful as it is to watch, the Toyota recall offers key lessons on crisis management,” Ms. Ingalls said.
Certainly, advisers at a larger firm can face sticky situations when the firm is swept up in a controversy (Securities America, for one, has taken a hit recently for its sale of questionable private placements). And independent advisers often have to do damage control after investment picks go south on them. “For independent advisers, it's often a product blowup,” she said. “They're not sure what they should communicate and how proactive they should be.”
Here are six tips that should help advisers better cope with PR disasters.
6. Don't stonewall the media
Jane Ingalls, founder and president of Artemis Communications, said advisers don't always need to spend hours on the phone with the media, but they need to answer phone calls from the media. Advisers believe if they speak with a reporter it will keep a story in the headlines longer. That's not always true, she said.
5. Monitor what's being said
Advisers need to be keenly aware of what industry experts are saying about their firms, Ms. Ingalls said. For instance, she noted that fund-tracker Morningstar Inc. is well-respected by investors and advisers. Therefore, advisers should stay current on any negative comments Morningstar says about their firms or their investments.
4. Talk to clients on a regular basis
Advisers who have set up solid communication with their clients before a problem occurs will be in a better position to approach those clients when something goes wrong, said Blaine Aikin, president and chief executive of Fiduciary360 LLC, a firm that trains advisers. “You need to communicate beforehand,” he said. “It's important that before something happens you've demonstrated that you have a professional approach.”
3. Tailor the response to the crisis
Advisers must think clearly about what type of message they want to send to clients during a crisis. “You need to size up the situation,” said Ms. Ingalls. “Is it a really big issue that needs to be handled proactively or is it something that merits a reactive response?”
2. Communicate from the inside out
It's important advisers communicate first with their employees about the problem and determine what type of message they want employees to pass on to clients, Ms. Ingalls said.
“If you're an adviser you want everyone from your assistant to yourself to be on the same page regarding what you'll do,” she said. “You want to know if it's OK for the receptionist to have these conversations with clients or do you as a business owner want to be the only one communicating with clients?”
1. Get ahead of the curve
Ms. Ingalls points out that the “sweep it under the carpet approach” rarely works. Be proactive, she says.
The bold approach worked for Andrew Rice, vice president and chief financial officer of Money Management Services Inc, a registered investment advisory firm which manages $131 million in assets, during the recent market collapse.
Instead of waiting for irate phone calls from clients, his firm held seven different small group meetings with clients and showed power-point presentations in a bid to ease clients' fears. “We only lost two accounts in this entire downturn and have picked up three new clients. We pride ourselves in how we service people but also in being really personable people.”
