Making Clients Ignorant of Short Term Events

This article could well have been titled slightly differently as “how to make clients think long term”. While that is an important topic in itself, many of you would agree that even long term clients often do get affected by short term events. In such case, the challenge really is in how to slowly train the clients to ignore short term events.

Take for example today's (11^th December, 2018) keenly watched event – election results for five states. Along with the results, some market volatility is expected to happen. I am sure that clients would also love to wear an astrologer's hat and attempt to predict the next year election results based on their personal but expert reading of the situation and also have some investment outlook / actions or strategy based on same. These ideas will be thrown at the advisor and some advisors may then be in a fix – how to handle such clients?

Well here are a few thoughts on how such clients can be trained over long term. But before we fund through the ideas, it would be better if you have a confident, well defined and logical approach to your advisory practice. So here are the few ideas that we wish to share...

1. Do not entertain or engage in short term forecasting:

The role of a good financial advisor is not to forecast equity market conditions or levels in short to medium term. However, an advisor may look at expected market volatility and current market levels to suggest appropriate investment strategies which are based on sound logic. While you may entertain clients in friendly market or political banter or conversations as part of relationship management, predicting outcomes or deciding short term investment strategies on such predictions, is strictly not advised. We would also not like you to engage in too much gossip, this only shows that you do not value your time to clients.

2. Create your brand and build around your investment / advisory approach:

A consistent and non-compromising approach to advisory is what you should adopt. Your approach may be a more detailed or refined version long term investment planning / financial planning / objective based approach. We would like you to stick to your guns and do not wander away with any innovative or tactical or any opportunistic, short term investment ideas. Once the clients are clear that you do not talk about short term, they are less likely to expect any changes in their investment plans on any short term / current events. Over time they will be better trained and suited to your style of functioning. That would mean less phone calls, less explanations, less stress and more business.

3. Learn to say 'No':

One difficult task for advisors is to say no to their clients, especially the big ones. We may often find ourselves in a situation where we have to make a choice. Choice can be between business or relationship on one hand and your advisory approach / style / ethics, etc on the other. Well we are like you to say no to such clients; unless it happens so that the client is who is driving your business or is one who cannot be ignored. In such rare instances, you have to take the final call. Except the above excuse, we recommend that you continue to stick to your guns and say no to any adventure. While some clients may leave you, over time would will find yourself attracting more clients suited to your approach than otherwise. It is better to part ways with a client who does not value or understand your approach and instead wants you to follow his own opinions. Such a client is risky who may some day leave or blame you and it would rather be better to invest in other client than him.

4. Make right conversations and communications:

Many a times the events are such that they naturally fade out from the minds and markets. One does not need to alert the investors of or give commentary on such events. That is not a frequent communication that should likely happen. If done, this is bound to attract attention and reactions from investors. However, there would be some events and market conditions that may require your attention. A period of extreme volatility or one sided movement of market in short term would be an opportune time to communicate, especially when the movement is a sharp one down south. Other occasions for communication would be when you would be initiating any asset allocation change or change in equity market overview and/or may be the periodic review of the client when some commentary is required to justify your investment approach. The point here is that, communicate the right things at the right time and not to communicate too much stuff when not required to be communicated.

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