What clients need from you right now

Your job is to listen to clients, understand their situation and provide ideas

Right now, we are going through some of the toughest times investors and advisers will ever see. In a short period of time we’ve moved from an 11-year bull market to a swift and dangerous equity market downturn that was hard to anticipate. Many experts felt equity markets were overextended, but they were not providing guidance that called for this extreme a downturn.

Investors are concerned and scared, and they should be. Their wealth has been reduced and that’s never enjoyable. At this time, a financial adviser’s leadership is not just helpful, it’s critical.

So what are the best advisers doing?

They are calling clients and having personal conversations. They are making sure that their clients and those around them are OK! The coronavirus is a serious health issue, and people need to first and foremost make sure they are healthy and safe.

As for equity markets, whether it was 1929, 1987, 2000 or 2008-2009, they were horrible, but they survived and life moved on. Economic conditions eventually will change. Human behavior during difficult times is always a major concern.

If you look at market downturns, one theory is that there are three major categories: structural, cyclical and event-driven. Structural are those in which the financial system is failing; 1929 or 2008-2009 were examples of structural downturns. Cyclical downturns occur when the economic cycle breaks down and earnings are dismal. Event-driven downturns can be caused by events like a war or an extreme oil price drop. Although this may turn into a cyclical downturn, it seems to be caused by an event, the spread of the coronavirus (although the simultaneous oil price drop has not been helpful).

All downturns are serious and should not be taken lightly. The toughest part of an event-driven downturn is it can be sudden and sometimes unforeseen.

[More: Steering your firm through the crisis]

So what do clients need?

They need leadership, guidance and comfort. Retirees need to know that their cash flow needs will be met. Savers need to know that someday they will be able to retire. Obviously, we are not clairvoyants, but we can be hand-holders. We can share with concerned clients that we are doing the best we can to communicate and understand their situation.

Advisers are resources, not daily news sources. We understand that when clients’ accounts go down, they get frustrated. Your job is to listen to clients, understand their situation and provide ideas. For many advisers, that may involve rebalancing clients’ assets. That means you may be selling some fixed income at higher prices to buy some equities at lower prices. Isn’t that what people want? Over my almost 40-year career in financial services, I was taught that “selling high and buying low” is a good thing.

Top advisers are stewards of their clients’ life savings. If you have been telling clients for some time now to “proceed with caution,” it is a good time to remind them of that.

Growing up, my dad always would say,“Life is tough but so are you.” These are tough times, but the world is not coming to an end. The best advisers are those who are prepared, not scared. The best advisers are those who are helpful, not clairvoyant. The best advisers add value.

Things will get better, and many of you will be stronger. Now is the time to reach out and have those targeted conversations with all of your clients.

[More: How the COVID-19 sell-off compares with previous market slides]

Ken Unger is a 40-year industry leader and founder of the Academy of Preferred Financial Advisors. He can be reached at [email protected].