Undoubtedly, the past year has been tough for everybody-advisors and clients alike. The housing bubble has burst, the credit markets have frozen, foreclosures are at record highs and people aren't confident that those in charge can sort things out anytime soon. As people watch their retirement savings dwindle, they become concerned, worried, fearful and depressed.
Athletes and coaches regularly go through tough times, too. They have losing seasons, go into slumps, suffer injuries, compete in bad weather and deal with ups and downs on any given Sunday. Anybody who participates in competitive arenas (business, sports, etc.) will have to deal with defeat occasionally.
As financial professionals, however, you must coach your clients to perform like champions in all types of weather. This will require you to help them seek understanding of the situation, focus on opportunities and then take action.
Let's examine each of these steps more closely as they apply to clients' needs and to your own role as a financial professional. In doing so, advisors must stay one step ahead of their clients, helping them navigate each step and assuring them, "I've checked it out, and it is safe for you to follow my lead."
Seek Understanding
To help clients understand the current situation, you must ask, what is the scope of the problem? What does it mean when the media says the credit markets are frozen? How will the financial crisis affect your client? Is she still on track to meet her financial goals? Where did all of the money that she lost go? How long will it take her to recover those losses? What solutions are in place and how will they improve her situation?
While it would be better for your clients to understand these things from you, unfortunately in many cases the media gets to them first. Clients see and hear words like "crisis," "meltdown," "bailout," "depression" and "crash," and are primed to become fearful, emotional, worried and reactive. Your role as a financial professional is to stand side by side with them on this step and assure them that you will coach them through
the situation.
Consider the role of a basketball coach whose team is eight points behind with one minute left in the game. He or she calls a time-out, and meets with the players. At first, the coach says something to the effect of, "We've been here before and we've prepared for this situation in practice." Next, with a calm voice, reassuring attitude, forward thinking and the expectation of success, the coach would clarify the situation, describing the defense and offense that are likely to be presented by the opponent; figuring out when and who to foul when the opponent has the ball; and offering a detailed game plan for how to close the eight-point deficit.
Just as a basketball coach is prepared for such a last-minute time-out, you must be prepared in advance to guide your clients through a tough economic climate. Among other things,
you should:
1) Have at your fingertips information (historical data, supportive documents, metaphors, case studies) that will clarify and normalize the situation. This will help you remove clients' tendency to react emotionally and irrationally.
2) Establish two to three key talking points that help clients understand their situation. Ask yourself what it is in your presentation that clients would most likely relay to a friend or family member (someone who did not meet with you)? Could they relay your key talking points? Could they do it in a calm, confident and unemotional manner as you did?
Of course, clients would have a better understanding of the tough spot they're in if they were better prepared beforehand. Tennis champion Ivan Lendl once told me this about facing challenges on the court: "I don't think there is any pressure if you do your homework and you prepare the best you can. How can the pressure mount if you prepare well?" Lendl didn't learn to simply cope with adversity, he prepared for it.