During periods of high volatility and market uncertainty, there is a temptation for advisors to maintain a low profile with their clients. The prevailing wisdom may be, "If they aren't calling, let well enough alone." This perception is especially true for advisors serving high-net-worth (HNW) clients.

Investors with significant wealth are typically not as concerned about short-term losses because they have the resources to survive market drops without impairing their lifestyles or objectives. They are less prone to panic when things go south and not as likely to make impulsive, potentially disastrous decisions as less affluent investors. As such, HNWs are less apt to call their advisors when the markets tremble.  

But as an advisor to HNWs for many years, I've learned that client silence is rarely golden. Just because clients aren't calling doesn't mean you should allow interactions to slide. No matter how hard you have worked, or what portfolio adjustments you have made on their behalf, if you are not regularly in touch with clients, you won't know what they are thinking.

Early in my career, I learned the importance of consistent client communications and it became an obsession. In the current economic environment and given the fact that everyone looks at risk differently today than they did just a short time ago, I have amped up my client contacts even more.

Every advisor has experienced calls from clients who respond emotionally to market conditions, and HNWs are no exception. On the other hand, I've found many wealthy investors remain surprisingly unruffled, even in the face of the current historic downturn. It may sound strange, but there are many HNWS that need to be prompted to revisit their investment strategy because they aren't worried. This illustrates the importance of consistent client communication; without it, we have no idea what they are thinking.

What Are They Thinking?

When a client has a $10 million or $20 million investment portfolio, there's not a lot to gain by being overly aggressive or not making conservative adjustments when necessary. But as these clients are usually accustomed to being successful at whatever they do, they are comfortable embracing the same level of risk they did earlier in life, which is how they got to be wealthy in the first place. As advisor, it's often difficult to convince them reducing their exposure is necessary or even prudent.

I had a client who insisted on an 80/20 ratio of equity to fixed income assets when there was no longer any need to be that aggressive. I had to convince him that since he needed $10 million to last the rest of his life he and already had $12 million in assets, there was little to be gained by aggressively trying to get to $15 million. What was more important was to make certain he stayed above $10 million.

Another client with a $20 million portfolio recently gave a friend $500,000 in exchange for a limited partnership interest in a new restaurant. When I inquired about it, he said the money was an insignificant amount and that he felt good helping out a friend. I understood his feelings but I can't think of many riskier investments than opening a restaurant in this economy. He was altruistic and enjoyed being a benefactor, but like many who have more than they need, he was unaware of how quickly his financial "safety margin" could be eroded through seemingly inconsequential investments.

First « 1 2 3 » Next