You might notice that certain discussions – about different insurance products, or about diversification – may be landing a little differently with clients of late. Undoubtedly, most are also noticing an uptick in the number of clients who would like to have the discussion about whether or not they’re doing the right things financially.
Depending on the client’s age, whether or not they have a financial plan, and whether or not their risk tolerances have been adequately assessed, the conversations planners are having with clients today are varied. Interestingly, however, insurance planners who discussed the current climate with the Insurance Portal say their clients, by and large, are surprisingly calm.
The calm may be a reflection of the fact that most clients of those who discussed the matter are clients with financial plans.
“I can’t emphasize enough the value in providing advice and comfort with a holistic financial plan at the base of it,” says Justine Zavitz, vice president, employee benefits and retirement with Hub. “People see the whole big picture and they see how all of it comes together.”
Jason Heath, managing director with Objective Financial Partners Inc. agrees saying the current market turmoil is a great opportunity for all advisors to lean into planning, particularly if this isn’t something they’ve done strongly in the past. “This is why we can’t just focus on security selection,” he says. “I think this is a real planning discussion opportunity for everybody.”
He adds that younger clients need a sympathetic ear and validation while older clients generally need to reconfirm how much they can afford to spend while not running out of money.
Stay the course
Across the board, however, their advice is the same: Stay the course. Save first. Remember long-term goals and remember that financial plans include testing for corrections, regardless of their cause. “They know it in theory, but when it actually happens, they forget,” says Naunidh Singh Hunjan, president of Hunjan Financial Group Inc. “You have to remind them again.”
In addition to the classic financial planning advice to live modestly and keep reserves, Jack Di Nardo, CFP with WealthWorks Financial adds this piece of advice when consulting with his clients: “Do something every month to improve your situation,” he says. “Have the discipline of doing something every month. Whether it’s paying down a little extra on a credit card, paying down a little extra on your mortgage, buying an extra can of turkey or some spare laundry soap. It doesn’t matter how much money you have.” He also adds that the practice works whether the client is 30 or 80, giving most a sense of agency. “Do something positive. It doesn’t matter what it is.”
In communicating with clients, also point them towards resources. Although they may be plentiful, often coming from investment managers, don’t assume clients have seen or internalized those messages. Clients sitting in on Zoom calls with their portfolio manager, for instance, report feeling reassured after being included.
Similarly, show clients that their portfolios can withstand these moments in time. “Most financial planning software these days will show you,” Zavitz says. “That type of story is more comforting than a simple ‘don’t worry.’”
In addition to the moment being a planning opportunity, they say routine conversations are resonating more with clients. Zavitz, for instance, enjoys talking about critical illness insurance which doesn’t always land with well-heeled clients who have reserves. Today, however, a market correction of the current magnitude is causing many to appreciate that there may be circumstances under which they may not want to take money out of their portfolios.
Quote: “I’ve found that someone can give the impression that they’re a confident investor, comfortable with a certain asset allocation in their portfolio, until something like this happens.” - Jason Heath
Revisit risk tolerances
Heath, meanwhile, says conversations about diversification are particularly impactful today, as well. The moment is also a good one to review plans and revisit risk tolerances.
“I’ve found that someone can give the impression that they’re a confident investor, comfortable with a certain asset allocation in their portfolio until something like this happens,” he says. “That can be really problematic because if someone’s risk tolerance causes them to sell stocks in a downturn, you turn a temporary loss into a permanent one, potentially.”
Zavitz also uses the annual meeting opportunity to really follow up with whether or not clients are still putting money away each month as market volatility can cause some to instinctively sit on the sidelines. Heath uses the opportunity to really probe the security of client’s jobs, particularly for executives, and adjusts plans accordingly. (All while encouraging them to save for the future while times are good.)
“If you’ve got the time and horizon to do so, then you just stay the course and wait it out. If anything, now is the time to be putting more money into the markets, not less,” Zavitz says. “If you don’t have that kind of time on your side, you probably weren’t in the right types of investments in the first place.”
Emotional reactions
The sentiment is echoed by Di Nardo who points out that for clients without a plan or strategy, every market event is going to create an emotional reaction. “I think that’s what these times should be training you to do – understand, watch your emotions and not get caught up in them. Anyone who’s too emotional is going to be lost.”
Zavitz also points out that most behavioural economics research shows that those responding and acting out of fear tend to have worse returns in the long run.
Sometimes though, despite all best efforts, clients will still seek stability during times of extreme volatility. For these clients, permanent life insurance can be an attractive option. Hunjan also has some clients waiting on the sidelines in GICs. Pro tip: Get the client to sign off on everything. “We don’t want them to come back and say they missed out on this opportunity if everything starts booming again,” he says.
Overall too, he says across the generations clients are becoming more conservative, buying more GICs, annuities and insurance policies.
Client communications, interestingly, is where the representatives’ opinions diverge. Consistent messaging is important but how to reach clients and how often to reach clients would appear to be a matter of preference.
Building trust
For those relatively new to the business, who are now trying to answer to clients, significant market corrections can be a scary moment. “It is also the moment where you can prove yourself though,” says Zavitz. “Not in the sense that you’re going to beat the market by being the best and getting the greatest returns, but in the sense of just being there for your clients and building that relationship and that trust element with them.”
While Zavitz prefers a five-minute video sent to clients, Heath’s approach is notably different. “We’ve had some internal discussions about it. We’ve held off on blanket communications.” He says this is because blanket communications about client concerns could potentially lead to even more concerns and possibly some panic. “I think one of the main reasons that people are worried and nervous is because there’s an implication that they should be nervous. There’s an implication that they should be making changes or doing something different,” he says, adding that he prefers to answer client concerns directly, as they arise.
“On the flipside, I’ve noticed a lot of portfolio managers sending out communications. Some of them have been very proactive. I don’t think there’s a right way to do it, but I think this reinforces the benefit of talking to clients about things (stock market volatility, recessions and bear markets) before they happen.”
