We seem to have a “crisis” somewhere, in someway, all the time -- Greek debt, debt ceiling, fiscal cliff, and the recent “taper tantrum.” The Fed stated the economy was better and might not need as much help in the future, so it was prepared to taper its efforts to keep interest rates low if things continued to improve. This news led some to dump stocks and bonds and even gold in June, hence the tantrum. 

Part of the value that we provide clients comes from our ability to take care of details on their behalf, thus freeing up their time and energy for other matters. When it comes to news, we often hear, “I don’t worry about that. That’s why we have you.” 

The press, however, loves to assume that whatever the headline of the day may be, advisors are crazed by an effort to call clients to discuss it. Though this is usually not the case, remaining silent can be a problem because it leaves people to wonder. Often when we do not know what is going on, we create stories in our minds about what or why something is happening. Our stories are rarely correct. The last time a friend did not return your phone call promptly, odds are you concocted a story explaining the lack of call back and the actual reason was something else entirely.

The hub bub about the taper tantrum reminds me of some of the events of  2010.

“What is going on with the market?  It is down 500 points,” one of our team asked. 

“Really? 500 points?” I responded.

I had to look for myself. Down 800 points, actually. Yikes. I felt my blood pressure rise instantly and thought, “Oh man, not again.” It was May 6, 2010 – the flash crash! That was a good name for it because the markets bounced back as quickly as it collapsed.

You remember that blast from the past don’t you? I do because I found the difference between the media frenzy about it to be the polar opposite to the reaction of our clients.  The only phone call I got was from a reporter wondering how clients were reacting and what we were recommending clients do now.   

When the story posted on the publication’s Web site the next day, the piece included quotes from a few advisors who were scrambling to put out communications to their clients, but mostly it was full of pundits trying to explain it. Many blamed a  “fat finger” for the drop. The pundits made this explanation with enough confidence that one might think they witnessed the action directly. 

Despite the novelty of the drop and bounce back, we did not rush to put out a comment to clients for several reasons. First and foremost, clients were not clamoring for answers. A week after the flash crash, that reporter was still the only call I had received about the incident. In all conversations with clients that week, I had to bring the subject up. Firm-wide, only a handful of clients called with any worry.  

This is the digital age and news travels fast. If we had put out something alerting clients of the flash crash, we would not have told any clients that follow business news anything they hadn’t already heard. Plus, while today’s media seems to place emphasis on being fast, we think it better to be accurate. 

In contrast, for clients that do not follow business news, if we had issued a special alert, we would have contributed to tuning them into things they want to tune out. Because of our measured approach, any unscheduled communication raises an issue to a different level.

Clients have told us they don’t need us to add to the deluge of information and opinion.  What they need and most appreciate is perspective and a viewpoint on what events mean to their family’s finances.   

If I had a nickel for every time I read that advisors can’t communicate with their clients too much, I’d be retired. That may be true for some clients, but not ours. Our clients want to avoid immersion in the day-to-day changes in the economy and markets. If we are not careful, we can undermine the value we provide by dragging them into the often crazy world of finance, consuming the time and energy we freed up for them. An effort to provide good service can actually become a disservice.

Studies show that the more information people get about their holdings, the more compelled they feel to act on the information and the worse they do. Clients need to be informed, but defining “informed” as “getting a lot of information” is a mistake. Quality should take precedent over quantity. There is already too much information out there, and it is simply not possible to ignore world and market events.

A few weeks after the flash crash, my family went on a Mediterranean cruise. The last day in the office before the trip, the S&P closed at 1087. The news was about the European debt crisis, the oil spill and the World Cup. On my first day back in the office, it closed at 1086 and the news was about the European debt crisis, the oil spill and the World Cup, almost as if nothing had happened. 

However, even being at sea didn’t insulate us from the news. Everyday there was at least one person mentioning the markets, which took a bit of a swoon during our trip. I met a few CNBC-junkie passengers who were truly stressed by it all. 

I have great confidence in my partners and staff. I was able to get my mind back in vacation mode fairly quickly after someone would pull me back into the financial world by sharing market news with me. I experienced firsthand the value of having the day to day attended to by competent ethical professionals. Many who got regular doses of market news didn’t have that support and sure seemed to have a different experience. 

So what did we do? We reached out selectively to those clients we believed might want to talk about things. We did not put out a special firm-wide communication.

Of course, just because our clients didn’t call us expressing concern doesn’t mean necessarily that they were not concerned. The silence just made us feel better about not rushing. Our internal debate wasn’t about whether to say something, it was about what, when and how. We gave our take on what it all meant in our regularly scheduled material. This seems to have worked well for our clients.

If your communications are going to add value, not detract from it, you need to be consistent in your philosophy and approach to client communications. Being open about it is important so prospective clients can better determine if they will get what they need from you. 

Instead of acting as though these drops are shocking or even unusual, we take it as chance to remind clients just how commonplace drops are. In every year but one since 1980, the S&P 500 dropped at least 5 percent at some point, usually more than once. In most of those same 34 years, a drop of 10 percent or more occurred. All were accompanied by the same kind of “oh no” media coverage we see with the recent tantrum. Most clients can’t recall the cause of more than a handful of these drops. 

So, what are we telling clients now? We know a few clients view any market pull back as the probable start of the next devastating bear market, but they are in the minority.  For most clients, unless something far more dramatic happens, they will hear our thoughts about the taper tantrum in our regularly scheduled newsletter.

For the few that need more immediate attention, we are reminding them that they are investing not speculating. They own what they own for very specific reasons and we will go over those with them and reconfirm that those reasons persist. We are encouraging them to let the traders and speculators worry about where the S&P will be next month. 

It is a complex, sometimes scary world with many factors beyond our control. Some level of worry is natural at times. We have to help clients deal with negative events. What, when and how you communicate can reinforce your efforts or work against it.  Choose carefully.

Dan Moisand, CFP, has been featured as one of the America’s top independent financial advisors by Financial Planning, Financial Advisor, Investment Advisor, Investment News, Journal of Financial Planning, Accounting Today, Research, Wealth Manager and Worth magazines.  He practices in Melbourne, Fla.  You can reach him at  [email protected].