Quarantine Begins
11 days ago, our California county ordered us to "shelter in place,” thus my wife and I began our work-from-home journey. While most of my friends debated Netflix shows to binge in a quasi-quarantine, my work got more serious as clients' account values began to nosedive and the outreach from clients poured in.
To say the least, wealth disappeared like I've never seen in my lifetime. My firm started the month managing close to $150mm (i.e. our clients' life savings). I'll never be able to describe the pain of watching $150mm turn to $120mm seemingly overnight. Millions of hard-earned dollars, vanished.
These account values are deeply personal to us. We've helped each of our clients design what their money could help them do some day. An experienced investor might see a short-term "correction" among the madness, but a worried family might see their retirement dreams ripped from underneath them.
Whether the fears are rational or not, acknowledging this pain is step one of sympathizing with clients and understanding how they feel in these sensitive times.
Managing Clients in Panic
On top of managing the accounts themselves, I've spent the past weeks talking directly to clients, hearing their concerns, and discussing what this might mean for them.
After dozens of impromptu conversations, hours of reflection, and a couple sleepless nights, this has easily been the most significant and emotionally difficult month of my career.
On the flip side, I've learned incredible lessons on how to manage clients through times like this, which I've never found in textbooks and will influence how I help clients forever.
Below are some of the most impactful lessons I've practiced recently.
People First, Opportunities Later
When markets turn for the worst, the most common question you'll get asked is, "what should we do?" You'll subsequently need to fight all urges to unleash your favorite strategies in response. This is about understanding them in this moment, not showing how smart you are.
The next thing to decode is figuring out which version of your client you're talking to. When someone is under stress, any well-poised person can shift into a frazzled version of themselves.
At a high level though, clients can mostly be segmented into a few categories. A subset of clients view market dips as opportunities and will want to scheme on the upside. Another subset will simply wait to hear from you and trust your executive orders.
The last subset of clients will shift to sheer panic-mode and need you the most. These clients will test your poise and highlight your true strengths (and weaknesses). Most importantly, these people are primarily looking for shelter, not an attack plan (yet).
Any basic investing course will teach you several, time-tested strategies you should use right now - don't panic sell, rebalance, tax loss harvest, do Roth conversions, and so forth. But when someone is calling because they've lost 6-figures of wealth in an afternoon, most of the aforementioned strategies listed mean nothing in this moment. Did the strategy make the money reappear? If not, then it's not important to the client right now.
Investment firms or other logical advisors won't make it any easier for you. You'll be inundated with charts and graphs instructing you to "stay the course." But if you rub charts and logic in the face of a fearful client, you will fail to connect with them during their time of need.
Sure, strategy and implementation to capitalize on the upside are hugely important for long-term success. Just remember that they can sound meaningless to a distraught person.
Life Allocation > Asset Allocation
Speaking of "staying the course," never forget that those plans can change, fast. This week, America claimed 3.5 million unemployed workers. For the newly unemployed or anyone who will be affected, odds are decent that their "course" has shifted. Meaning your previous strategies might have just flown out the window.
We all know that selling stocks low is the ultimate advisor sin, but when your clients are suddenly uncertain of their ability to make ends meet, this might call for a course correction.
Said differently, reflexively shouting "stick to the plan" might backfire when you eventually learn there might be a new, better plan. It's the advisor's job to zoom out and learn what's changed in their life, and their asset allocation might need to be adjusted to match, even if it means selling at the bottom.
Control
When your client's world seems to be crumbling around them, there is comfort knowing you can stop the bleeding of their financial livelihood with a few clicks. When they call, they want to know if you'll help them gain some control in their lives.
Back when you discussed their financial plan and showcased beautiful charts of a rosy future, "the plan" made so much sense. But in crisis mode, attitudes can shift to self-preservation and the lack of doing something might feel crazy to them.
Admittedly, last week I helped two clients commit the sin of selling stock at deeply low points. That decision haunted me for days, like I'd broken a sacred advisor's code. I finally found peace after listening to a wonderful podcast where the guest explained how selling during turbulent times actually makes sense for certain people, even though it's academically unsound.
Ultimately, humans crave control during uncertain times, and sometimes the suboptimal choices are the best choices if it keeps your client generally headed in the right direction.
Articulation > Action
Cries for help will take many shapes, and clients will rarely articulate their concerns correctly the first time. When markets dip into recession territory, you will invariably hear questions like:
Can we sell stocks until this passes?
Is there a smoother way we can manage this?
Immediately responding to these direct, impulsive questions is a mistake. Why? Because it is probably the wrong question.
Instead of answering the initial question, it's always better to begin by asking questions in return about their well-being. "It's been crazy lately. How are you and your family doing?"
Time and time again, I found that the clients' initial questions didn't explain their feelings, their concerns, or desires for action. They just wanted to open the door for a conversation. Sometimes, the conversation alone (with no action) was the antidote they needed.
Don't Be Silent
There is nothing more exhausting than reacting to someone reacting over something else. By sitting back and waiting for the emails to pour in, I opened myself up to added hours of difficult conversations and unnecessary stress.
If I had simply reached out to those who needed me most before they contacted me, I could have controlled the tone much better. Sure, it would have required excellent foresight into who would be fearful, but it's my job as their advisor to anticipate their emotions.
As a firm, we mostly avoid mass email blasts to clients and instead prefer individual attention. That said, this recent market selloff was our time to be loud and the authority on the subject.
There were a few days where we were silent, diligently working on our action plans for clients, but that silence felt like avoidance to them. We quickly adapted and regularly shared broad messages to share our thoughts and open the door for conversations. Being front and center during uncertain times is the strongest move you can make as a leader for your clients.
Lessons for My Career
I've never been responsible for more clients (and wealth) in my life, and there's nothing quite as humbling as being on the receiving end of several "what should we do?" calls during a crisis.
I'll never have all the answers at the right time, and I've learned that's okay. The most important thing we can do for our clients and the people we care about is show that we're here for them, no matter what life brings.