Since the terrorist attacks on America, it's been very difficult for people to get back to business as it had been before September 11. The specter of war is with us every day, lower Manhattan is in ruins, airplanes are empty, and lives have been changed forever. For financial advisors who are normally in regular contact with their clients, the situation has been especially complicated and delicate. Prior to the attacks, the country already was on the verge of a recession, and its impact on the economy surely would take its toll on investors financially and psychologically. But many financial advisors were conflicted as to whether it was appropriate to call their clients and, if so, how soon to do it. If they did call, what would they talk about?

In the two weeks following the attack, Merrill Lynch, in conjunction with Prince & Associates, asked 2,369 investors how they felt, particularly when it came to their advisors, the economy and the stock market. Of those surveyed, 1,952 were retail investors with from $100,000 to $1 million in investable assets, and the other 417 were affluent investors with more than $1 million in investable assets. We learned that what those investors most wanted from their advisors was personal contact. They wanted to be asked how they were feeling and what they were thinking. They wanted to talk about their friends and families, about life-not their finances. They wanted to be treated as people, not clients. As it turned out, however, very few had the chance. Overall, only 16.9% of the retail investors and 24.9% of the affluent investors had personal contact with their advisors in the two weeks after the attacks. (For our study, "personal contact" is defined as a phone call or a face-to-face meeting, as opposed to an e-mail or message on an answering machine.)

Given the tragic circumstances, it would be a mistake to fault any advisor for not making contact. Many people in the financial services world knew someone who died, and virtually everyone spent time with their own families and friends. Advisors were not wrong or remiss because they were unable to gather their thoughts and pick up the phone to call their clients. Still, as we learned, those clients who did have personal contact with their advisors were the better for it, even if they didn't discuss financial affairs at all.

The Outlook Before

Even before September 11, of course, the economy and the stock market were faltering. It had been a long time since the last bear market, and investors were understandably jittery. And if anything, the news in the weeks prior to September 11 had been getting worse. Consumer spending, which had kept the economy barely afloat during the downturn, had finally slowed, and unemployment had spiked unexpectedly. Despite the Fed's many interest rate cuts, the three major market indexes all were falling and threatening to drop below the lows of April, which many economists and experts had confidently called a rock-bottom floor. In the last week of August, for instance, the Dow fell below 10,000, and the Nasdaq went under 1,800, both for the first time since April. The S&P 500, meanwhile, already had dipped below its spring low.

The stock market was closed after the attack, and when it reopened the following Monday, it suffered through one of its roughest weeks ever. The Dow, for instance, was down 14.3%-its worst week since the Depression. And though the market subsequently rebounded somewhat, as we began October, all three indexes were still lower than they had been at the close the day before the attack.

A separate study of 1,066 affluent and retail investors that we had completed before September 11 showed investors generally were pessimistic about the state of the stock market. But they were confident of the long-term strength of the American economy and, at least for those who had regular contact with their advisors, the importance of advisory relationships.

To cite just one notable example, 68.3% of affluent investors who were in regular contact with their advisors believed that the value of their portfolios would go up in the next year, as opposed to just 38.9% of those who had no contact. The survey also showed the degree to which many investors had reconsidered the role of the Internet in investing once the bull market had ended, with 88.5% of affluent investors and 78.6% of retail investors saying they were going to cut back on their online trading.

Breaking The Silence

Given the already bleak financial picture, it's not surprising that some advisors were hard-put to call their clients after the events of September 11. What did those who did call their clients talk about? Looking at the combined numbers for the retail and affluent investors in the study conducted after September 11, better than 90% discussed how their clients were doing emotionally. Other common topics included how family and friends were reacting to the attacks, what the government should be doing and terrorism. The state of the market and portfolios were discussed far less extensively, and the only financial topic in the top five was, understandably, estate planning.

We learned, however, that even when there was little or no discussion about a client's portfolio, the advisor's effort clearly made a major difference when it came to the anxiety level of both retail and affluent investors.

Our survey also provided strong evidence supporting the case that an advisor can be an important part of a client's inner and trusted circle. The investors who had no contact with their advisors largely relied on their friends, family, radio and TV and co-workers for financial information. Those percentages stand in stark contrast to the ones for investors who had personal contact with their advisors. Interestingly, whether or not they had been contacted by their advisors, very few people went to their primary advisor's Web site to find information.

Investor Perceptions

Again, even though they may not have discussed the subjects with their advisors, we found that investors who had personal contact were far more positive about the stock market and their advisors than those who were not contacted. For both retail and affluent investors, those who were contacted were less likely to pull money out of the stock market and more optimistic that the stock market was the best way to invest for the long haul. Those contacted also had a much higher opinion of their advisors' professionalism and stock market expertise, as well as an abiding belief that their advisors "understood" them. Those responses add up to a pretty powerful endorsement of the value of interaction, as evidenced by the client-satisfaction results we compiled.

All investors were in agreement on two key points. First, 93.8% of affluent investors and 95.5% of retail investors said the recent stock market experience had really scared them. And second, 86.4% of retail investors and 90.2% of affluent investors felt it was better to work with an advisor than go it alone.

Regarding two other issues on which economists have expended a lot of brainpower, the results were revealing. Some experts have predicted that an attack by the United States would rally the market-as was the case during the Gulf War-and indeed, when President Bush ordered U.S. forces to head for the Persian Gulf, the market did rebound somewhat.

Less than 3% of the 2,369 investors in our survey agreed, however, that an attack on our part would trigger a rally. Also, in what is clearly bad news for the economy, nearly 74.2% of retail investors and 67.4% of affluent investors were reconsidering a major purchase such as a new car or home. This means the economic life support provided by discretionary spending finally may have come to an end, and a full-fledged recession will soon be officially upon us.


During the first week that the stock market reopened, very few investors were actively engaged in making transactions of any kind, but those who were in contact with their advisors were somewhat more likely to do so. On the retail side, 29.8% of those who had personal contact bought bonds, as opposed to 2.5% of those who were not contacted. The percentages for the affluent were 27.9% and 9.3%, respectively. Overall, 58.1% of the retail investors and 51% of the affluent investors who had contact bought or sold stock as opposed to 18.5% of the retail investors and 22.7% of the affluent investors who were not contacted.

The most compelling point was not what the investors did or didn't do, but the degree to which they followed the advice of those advisors with whom they were in contact.

The Next Three Months

When it came to looking beyond the immediate term, the impact of contact was equally dramatic. For instance, when asked if they were likely to look for a new primary financial advisor, 25% of retail and 36.7% of affluent investors who were not contacted said yes, compared with none of those investors who had been contacted. Similarly, 74.2% of retail investors and 78.8% of affluent investors who were contacted were thinking about moving more assets to their primary advisors, as opposed to 0.7% of the retail investors and none of the affluent investors who had not been contacted. Finally, when it came to referrals, the primary driver of new business, 72% of retail investors and 84.6% of affluent investors who had been contacted said they would refer their advisors, as opposed to 0.6% of the retail investors and no affluent investors who had not been contacted.

Before And After The Attack

When we compared the results of the studies conducted before and after September 11, there were some noticeable-and very understandable- differences, particularly when it came to the level of anxiety that investors were feeling, which nearly doubled after the attack. While some other percentages varied, the general confidence in the long-term prospects for America's economy and the stock market was evident in both studies-as was the profound discrepancy between the feelings and actions of those investors who were in regular contact with their advisors and those who were not. In brief, those who had regular contact had a high opinion of those advisors and a willingness to follow their advice; those who had no such contact were likely to be looking for a new advisor.

The Obligation To Connect

The past month has been difficult for Americans in every line of work and every walk of life. Many people have stepped back to reassess their priorities, and the healing process will go on for months and, in some cases, years. As we slowly move back toward "business as usual," whatever that may turn out to be, the results of our study after the events of September 11 make one thing clear: Advisory relationships still carry with them the obligation to interact on a personal level. Talking about a client's portfolio may not be the right approach in such times of crisis, but as we have learned, clients are always ready and willing to share their hopes and fears with their advisors.

Hannah Shaw Grove is managing director and chief marketing officer of Merrill Lynch Investment Managers.