During COVID-19, investment advisors are more essential than ever. When times are tough, clients can lose sight of their financial plans while panic leads them to make decisions that could hurt them in the long run. Advisors can help them feel more secure, see the bigger picture and stay on track.
In this conversation, Purpose founder and CEO, Som Seif, talks with Purpose Advisor Solutions CEO, Jeff Gans, about:
- How advisors can proactively help clients make sound decisions in times of crisis
- Addressing short- and medium-term fears so clients don’t lose sight of their long-term goals
- Why it’s crucial right now to have tough client conversations so that you understand their needs inside and out
Read the transcript:
SOM
Hi everybody. It’s Som, founder and CEO of Purpose Financial and Purpose Investments. I’m here quarantined from my home and wishing everyone to be safe and secure today. As we go through this difficult moment, I always want to remind everyone that we are in unchartered waters and we are all in this together.
For today’s discussion, I asked my friend and colleague, Jeff Gans, who is the CEO of Purpose Advisor Solutions, to join me. Last week we spoke about the environment and how to think about portfolio decisions today. This week I want to home in more on what advisors are feeling and going through and try to give you the insights and tools you need right now to help manage your clients and practice. I thought Jeff is the perfect person to bring in and ask about his perspective from what he is hearing directly from advisors and their clients and also from his decades of experience managing Ameriprise’s advisor network in the US and TD’s advisor network here in Canada. I know from personal experience how he’s been laser-focused that whole time on the value of personalized, customized advice and really understanding what advisors need to run a successful business.
Jeff, thanks for joining me today.
JEFF
Thanks, Som, thanks for having me on and happy to be able to join even though it’s not ideal circumstances, but good to have the conversation.
SOM
Right. Jeff, I’ve got 3 questions I want to ask you today and you know really want to plug into not only your own experience but what advisors are telling you right now as we work our way through COVID-19. Now first, what are you hearing from advisors about the conversations they’re having with their clients and how have they changed during the crisis?
JEFF
Yeah, that’s a great question. I think it’s been really interesting for me how different the conversations are now. In previous downturns there was lots of focus on the markets and where they were going, you know whether they were going up or down and how the client could take advantage of that or deal with it. But today the clients are focused on much broader issues and bigger risks – things about whether they will they have a job? How long will this last? They’re worried about the health of their family and how they’ll deal with that.
Those are really increasing the anxiety levels that clients are seeing and what advisors are dealing with and it’s making it much more difficult to cope with decision making, and that’s definitely something that I think we can all relate to right now. Even in our own personal lives we’re all seeing those same pressures.
And more than ever clients need help sorting through their decisions, organizing their thoughts and making the right trade-offs for their individual situation. So, while maybe in past situations maybe the stress just came from financial, now it’s coming from a broader set of things making it even harder to make effective decisions. And a lot of this gets down to you know the very basics of neuroscience and I won’t spend a ton of time on it because there’s tons of reports out there that talk about how really nature is taking over in our bodies and we’re conditioned to have this flight or fight response.
And while that works in the case of a fire or a predatory attack, it makes it even more difficult for our minds to make effective decisions. The responses overwhelm our abilities for higher-level decision making and to effectively thinking through the decisions. And the real risk is that the clients will make panicked responses that don’t really fit in and don’t actually help them achieve their longer-term goals. And this propensity to act irrationally and make bad decisions only escalates as the challenges, as the panic gets higher.
So right now, more than ever, clients really need their advisors to help them work through their decision making. And when they’re having those discussions, the natural focus for advisors sometimes is to think about the risk in the markets and choosing what’s the best option, what should they buy, what should they sell? And as you discussed last week and other discussed there’s a lot to think about in managing those trade-offs. However, I think it’s really equally important to take a step back and think about what are the risks that your clients are going through?
All the research shows that helping people from acting irrationally, making good decisions in times like this has an enormous impact on long term results. Since selling at the bottom of the market certainly happens and we see those clients that aren’t able to manage through that are the ones that truly get hurt. And we want to help ensure that clients react appropriately to changing situations – not over-react.
And if you can’t help clients manage through these tough times, if you can’t help them manage their decision making, all evidence is that any other decisions you make on the investment side will not be enough to make up for those losses. Now, it’s hard to pick up the phone, right, it’s hard to pick up the phone and have those tough conversations but it’s so important now. And it’s so important to be proactive with that with your clients and at the end of the day the clients that have a sense of confidence, the clients that are able, that you’re able to give a sense of calm will remember that you have done that for them. And it really helps solve, solidify and build the relationship.
SOM
Yeah, what’s interesting, Jeff, though is that you’re saying in normal time you’d pick up the phone and maybe you’d call about an idea or an opportunity or how the markets are reacting, you know, or moving, or the returns on their portfolio. Today, you’re saying that the clients are actually less worried about their portfolio return as much as they are potentially more existential things around their own lives.
You know whether they’ll have a job, whether they’ll be able to pay their expenses, whether their health is going to be ok, whether their families are going to be ok. These are very different kind of discussions that you know advisors are going to be having to have you’re saying. And I think that’s an important point, rather than just you know did Royal Bank go down 30% or is there an opportunity to rotate their portfolio into, you know, a different set of portfolio assets. I think that’s a secondary component of the conversations you’re saying.
JEFF
Yeah, absolutely.
SOM
You know, I think just on that, we know that feeling more prepared and having some kind of plan, you know, as you’re saying is really important to kind of help people manage fears and concerns. Maybe talk a little bit about what are the key things advisors can do right now to stay on top and on track of people and also be helping them manage through I think you described it as very irrational behaviour that could be kind of disruptive.
JEFF
Yeah, I think you put that really well. And I think there are three things advisors need to be thinking about, and many advisors are doing this already, right, but you even have to I think lean in more heavily on these three things.
I think the first thing, most importantly, is to start putting some organization to the discussion that you’re having with clients and that sense of organization I think really helps gives the clients a sense of control. Part of this is being, is how you set up meetings, right? If you’re forced to always be reactive then the client doesn’t feel like you actually have control of things. On the other hand, if you’re reaching out, if you’re setting up time with your best clients in advance, they get a feeling like “oh, someone’s got a hold of this, I maybe don’t have to worry quite as much.”
I think the other thing is, when you’re being proactive and setting up the time, then you’re able to decide what the conversation, you’re able to define the conversation. You’re able to have the right facts with you, right, you’re able to be more prepared when you’re going into the meeting. And when there’s a sense of organization it really does help the mind re-focus, and lets the client actually start having more critical thinking. Having two or three ideas that you focus on helps reduce the complexity of the conversation and also helps the client get right at what’s right for them. So really organization becomes important.
The next thing is asking questions to truly understand what concerns are. Over the past couple years, we’ve seen lots more advisors really focusing in on planning and discovery. Now is the time to do that ever more deeply, right? It’s not the time for blanket assumptions, it’s not the time to come out with recommendations really quickly. It’s more about really understanding and being empathetic with the client’s situation so you can understand that.
Now that’s not only important so you can understand what’s going on but getting the client to articulate it, being able to talk about it, helps them actually get a greater sense of calm because they know what their priorities are. So, is there a job at risk? Is there a family that needs to be supported? Are there issues going on with loved ones and the start worrying about, you know, what happens if someone passes and how they deal with that? The more you understand what is driving the thinking the more you can understand decision making.
Look, if a client says they want to go all to cash, you want to have a conversation to understand why, right? What is it that they’re fearful of? What are they worried about? Are they worried about the markets, are they worried about paying for things, what are those things? And so starting by learning and truly caring about the details of the situation really help you then guide the conversation and the decision making going forward.
Lastly, once you’ve asked what their concerns are it’s really important to acknowledge them and show that you get it. That you’ve heard them. People need to know that you understand and that care about them. That they’ve been heard. Having someone acknowledge that what they are thinking makes sense helps let them begin to focus on how to manage and know that you are solving for their situation.
Put some context into it. Until a month ago our minds had been conditioned for over 120 months without a correction. Now, the client’s getting inundated with negative information every day, so they’ve suddenly had their context changed. If you’re able to give some context on the longer term, and help give some perspective on what can happen, and how to think about it, it will help them move forward. We know governments are acting as a backstop the economy. We know that there will be solutions from a medical side over time, maybe not tomorrow, but over time we’re going to get there. Helping clients being able to see that can help them start progressing and thinking over the longer term.
SOM
Yeah, and I mean, you know, Jeff, this is something that you and I talk about, like you know I’ve started to turn more positive and optimistic in the last week here with the data, with what I’m seeing, and you know I fundamentally believe, and I’m going to tell you straight up, this is not going to be the end of society. So, so, we have to understand, this will pass and, you know, as a result of that we have to all actually believe that there are solutions that we’ll be thinking about in the medium and long term that are actually very important to be positioning for today.
So, I think, you know, if I can give anybody some confidence that, you know, this, it’s hard, even Jeff and I when we’re talking about our businesses, you think about the business, it’s hard, we’re staring at our feet a lot right now. When we think about how do we kind of turn our attention to the medium and long term, which is really critical, because all we think about, you know, in running our business, is how do we do that but how do we also start to help advisors in getting their clients to think about the medium and long term, not just staring at their feet at the moment.
What are some ideas that advisors specifically could start to position their clients that way and also, again, get them from acting irrationally in the moment and letting panic take over?
JEFF
Yeah, I think trying to get to the long term, I think, is really important, especially in times like this where we tend to lose, I think, a little bit of context. Yes, this will be a difficult three months, six months, 12, 18 months, but there is something longer term.
But I think for a lot of clients getting things broken down into manageable time frames. That way you can show them how you’ll be addressing their risk in the short term, which is what they’re really concerned about right now, without sacrificing their balance and long-term outcomes. And, helping clients see and manage it, and organize it into different things, so I think you can start with figuring out what do they need to get through the next 90 days.
Remember the more basic needs are the things that are taking over their mind right now. And helping provide a little clarity and understanding that these needs will be taken care of, that they’ve got enough money available that they don’t need to worry about, will allow the client to start thinking about the medium and longer term.
Make sure they’re prepared for short term bad news. And I think this is actually really important. Clients should understand that in the next, you know, 30, 60, 90 days, there’s going to be some real volatility in the market. There’s going to be ups and downs. If they can actually know that’s going to come, it will make it a lot less likely that they’ll react to it negatively when it does happen. And so, you want to have them prepared for that.
After that, I think you can start looking at the medium term, let’s say the next six to 18 months. We can’t predict the markets over the next six to 18 months, nobody can, but we can ensure that they have access to money when they need it to manage their lives regardless of what happens. And it actually is a measurable number. It’s something that you can slow down with a client and say look, I understand you see there’s a risk of being without a job for the next 12 to 18 months. I understand your concern about the economy for the next 12 to 18 months. But let’s talk about what does that look like? What do we need to support your family? If we can quantify that and ensure that they have a backstop for the next 12 to 18 months, now we can go even further and start talking about the long term.
Once they have more confidence in managing the short to mid-term, you can refocus on long term goals, which is exactly what you had set out to do. And I think taking some time and saying, you know, what were these clients’ long-term goals? How do we go back to that? And reminding them throughout the process that drastic action, timing the market or selling on the dips usually negatively impacts the ability to achieve those long-range goals. But you’ve really got to get that sense of confidence back in the short to mid-term can they focus on the long term and relax. Once they understand that everything’s in place to help them, that there will be money available when needed, they can think about those opportunities.
And throughout all of this, you know, I think it’s crucial to remember these are not easy conversations. But they’re critical to keeping clients on track. Everything in their psychology is pushing them to make irrational decisions, to sell everything, to time the markets, to go in different ways. And even if that’s not their nature everyone around them is talking that way. They’ll succeed right now by organizing, listening and understanding how you can help them make better decisions.
I think the last thing I would say on this, I think it’s also important to think about your own mental health and you’re going to be dealing with a lot of tough questions over the coming months, a lot of tough situations and, I think, a lot of responsibility. What advisors do is so incredibly important, and I think it’s important that you actually carve out some time in the day so you can think about how you’re feeling about things. Both about your personal life, but also about your interactions with clients. Having that time to really imagine your emotions and your thoughts will help you be more effective when you talk with clients.
SOM
Well said, and I mean it’s that type of guidance and expertise that advisors need to be providing to their clients, even on a good day, Jeff, and this whole crisis right now points out how being that kind of trusted advisor and guide to the client is so important at the moment, and frankly always.
These are all amazing points. I know all of our advisors and our partners and our advisors and our friends really appreciate you taking the time to do this. I do, thanks Jeff, and I really appreciate you being with me today.
JEFF
Great, thanks for the time, Som, happy to help.