With the Standard & Poor's 500 40% lower as of this writing than its high of October 9, 2007, it may not seem precisely the moment to tell you to break out the champagne and celebrate. But if you take a step back from the torturous panic terrorizing markets to see the bigger picture, it's clear that the self-destruction of Wall Street's giant brokerage firms creates the opportunity of a lifetime for independent advisors.
A new competitive landscape has been created. On the spot where Wall Street's behemoths have fallen, independent advisors will rise-if they act strategically and swiftly, and if they do the right thing for people.
It matters little whether the stock market recovers much of its losses very soon or continues its terrible descent. Even in the depths of this financial disaster, we can rest assured that people still need advice. Arguably, in fact, they will need it more than ever. And we can also rest assured in knowing that the main source of investor advice-the once-mighty giants of the financial services industry-are disgraced, discredited and decimated financially. You, Mr. and Mrs. Independent Advisor, have an opportunity to communicate your message to investors who never before would listen.
Wall Street's biggest firms were complicit in nearly bringing down the American economy. Greedy Wall Street executives perverted capitalism's foundational precept-to pursue profit-by recklessly leveraging capital far beyond prudent standards to make promises they could not keep.
The question is: What will you do with the opportunity that has come to you, albeit through such a painful reckoning? The market's plunge does complicate the opportunity before you. But cowering under your desk and waiting for the comeback-if there is a comeback anytime soon-is no strategy.
What you need to do now is talk to your clients and begin planning strategically to respond to the terrified investors who are now receptive to finding alternatives to the Wall Street brokers. Here are some thoughts about what you can do now.
Graze On Good Grass. Mute CNBC, CNN or any other TV station. TV in times like these is a distraction. It's a poor source of information. The talking heads that you see every day are the same, and they limit your points of view. Moreover, the shouting matches that invariably break out are a waste of time. TV is good at covering live events, but the print media are better sources for breaking news and analysis. Subscribe to news alerts at www.NYT.com (The New York Times), or www.CNN.com. They're free. Most alerts from http://online.wsj.com/ (The Wall Street Journal) are free but there is a premium service you must pay for, and all alerts from www.FT.com (Financial Times) require a subscription. Relying on these sites for alerts and keeping the TV muted or turned off will prevent distractions while allowing you to stay on top of breaking news. Moreover, getting in-depth analysis from these three print publications is far better than relying on TV financial news. CNN's and Fox's coverage is repetitive and superficial. The financial TV channels are limited by the nature of the medium. Sources and interview subjects for TV's financial stations are often chosen based on who offers the best sound bites or who is able to make it to the studio at the moment. The print media select experts from all over the world based on their knowledge. Financial reporters at these newspapers are themselves experts and they ask questions to the world's smartest people after doing more research than TV news personalities generally have time for. And print reporters filter their comments to bring you the most intelligent analysis. You need to know more than your clients, so spend at least an hour a day reading the best financial newspapers in the world.
Routine. In times when things feel out of control, it's easy to get sucked into the chaos. So bring order to your day. Get up at no later than 6 a.m. and begin each day by exercising. If you have not been exercising, start now. If you don't have a home gym or gym membership, walk briskly for an hour or run. Get to the office early, no later than 8 a.m. Spend 30 minutes planning your day, writing down what things you must accomplish and prioritizing them.
Besides your hour spent reading the news, block out sections of time to call clients and prospects. Devote an hour or two each day to a marketing program-a Webinar, blog, newsletter, letter, video blog or whatever ways you feel most comfortable communicating. Clinging to structure when things feel uncontrollable is important.
Be There. I've covered every market turndown since the 1987 crash and after each one there are stories about advisors not answering the phone. The other night on Jay Leno, comedian Dana Carvey joked about phoning his broker only to hear the strange voice of a Chinese woman answer to say in broken English, "No broker here. Bye, bye." You don't want to be one of those pathetic jokes. In fact, you want to be proactive. By doing the right thing in the next few months and being there for your clients, you will naturally bring in more business and lose fewer clients.
Get To Work. As the shock of the crash subsides-assuming it does not extend into November-clients will need emergency care. Call each client personally and tell each one that you are reachable anytime, day or night, weekend or weekday. Schedule an appointment to meet with each client for an in-depth review. Tell your staff that they are working every weekend for the next six or eight weeks, and let your clients know about your expanded hours. You are about to find out who among your staff can be depended on. Make that clear to them. Schedule a staff meeting every day to be sure everyone understands his role and knows about any special situations.
Plan it. Start by meeting clients that you know are less affected by the market's crash. Don't start with your most important clients. Spend time preparing for every client meeting and phone call by looking over the details of the client's portfolio and goals, and jot down the two or three main points that you must communicate to each client before each call or meeting. This will help prompt the appropriate response from clients and prospects.
Listen. People want to be heard. Whether they are angry, frustrated or scared or feeling a combination of all these emotions, it's critical that you listen to them actively. Clients may say some nasty, hurtful things. Do not interrupt them. Resist responding angrily or emotionally. When a client finishes telling you how he feels, pause and let there be silence while you think about what he said. Given silence for two or three seconds, people often will continue with elaborating an idea. A good listener also asks leading questions that allow the speaker to continue developing a thought. So when a client shares a concern about how he is worried about paying for a child's college education, help the client fully explain his concerns by asking simple leading questions, such as, "Is there anything more you can tell me about that?" or "What else?" By encouraging your clients to fully explain their fears, frustrations and problems, you help them find solutions.
Actions Speak Loud. When it is your time to speak, be prepared to let your client know what you're doing for him. Tell the client about specific actions you are taking on his behalf, such as reviewing his investment policy statement (IPS), rebalancing his account, updating his retirement plan, speaking with researchers at fund companies, interviewing managers with specific expertise and holding daily conference calls or Webinars. It's reassuring when you tell him about a few substantive steps you're taking.
You're Not To Blame. Reasonable people know you are not a seer. They do not expect that you could have foreseen what has happened. Don't blame yourself. Do not act like you have done anything wrong. Just as a patient cannot expect a doctor to always cure him, clients cannot expect you to protect them from all investment risks. Most clients know that the advice you have given them is based on prudent principles. If you have practiced professionally and have investment policy statements that your clients signed off on, then you truly did get them to communicate their needs to you, and you have been helping your clients achieve their goals in a way that is aligned with their wishes and best practices for financial professionals.
Now, It's Personal. Let people know if you are also personally affected by the financial crisis. Show that you understand their fears and pain. Explain briefly how it has impacted you and your family. Don't dwell on your personal situation, but mention it. By making it clear that we are all at risk, risk is more acceptable because a client understands he is not being unfairly targeted.
Institutional Support. Voice respect for our institutions, such as the Federal Reserve. I recently encountered an advisor who railed against the Fed. "They're trying to collapse the world economies on purpose!" he wrote to me. "They're not here to help. They are world bankers with their own agenda." Such talk does little to inspire confidence.
Make A Statistical Case. Explain the length of time and amount of losses in other bear markets. Explain that the biggest gains from market bottoms historically are won in the first 40 days after hitting a low. But don't rely on statistics. Your behavior and the commitment you show to helping the client is more important.
Don't Dwell On The Negative. Don't overuse words like "crisis" and "extremely." Temper your language to keep people from becoming overly emotional. Maintain a calm, gracious and helpful presence and avoid appearing flustered or overwhelmed-even if you are indeed flustered and overwhelmed.
Review Marketing Vehicles. Reread your brochure, Web site and other marketing vehicles. Are they up-to-date? This is something you should do once a year anyway, but most advisors don't. And yet they have the marketing opportunity of a lifetime coming their way. You need to prepare for it. Make sure your marketing vehicles address the changing times.
Differentiate. Just as politicians want to be sure you know they are not part of the Washington establishment, you want to be able to explain why you're different from brokers who work at Wall Street brokerages. Investors used to take comfort in knowing that their financial advisor worked for a giant firm. That myth has exploded in the faces of millions of high-net-worth individuals. It's a great differentiator for you and your business that you deliberately chose not to work for a large brokerage because you did not want to be told what to sell and did not want your fortunes and your clients' to be tied to that of a giant financial corporation with its own agenda. Custodians and independent B/Ds are generally not involved in any product manufacturing, or if they are, it is only a tiny bit. They did not get caught up in the credit swaps and mortgage market the way the large investment banks with major trading operations did. Take a look at the performance of Charles Schwab's stock versus Merrill Lynch's or any of the other big brokerages' equity for a vivid illustration of how different the independent advisor business is from the Wall Street firms. Be sure your marketing materials explain the benefits of being an independent advisor.
Blog. Clients need you now more than ever. So make yourself more available by using the Internet. Write a blog daily. Even if it's just a paragraph or two, it shows clients that you are concerned and on top of things. Not being in touch daily during this crisis invites problems. A client is far less likely to fire you if you have been proactively in touch.
Webinar. GoToWebinar.com is a great tool that all RIAs should be using. If you are a registered rep and your broker-dealer refuses to let you blog for "compliance reasons," ask them whether they will allow you to use GoToWebinar.com. This extremely powerful platform lets you conduct as many Webinars as you want in a year with as many as 1,000 participants-including all phone costs. Webinars are basically phone calls, which do not currently require monitoring by your compliance department, so your B/D may let you run them. And if your broker-dealer really does want to know what you are saying, you can record them. The GoToWebinar platform includes automated tools to manage these events, automatically reminding people beforehand, surveying them afterward for their reactions and allowing you to send a follow-up e-mail to thank them for coming and to tell them about other events. You can also automatically e-mail people who registered but didn't show up and give them a link to a recording of the event and presentation materials that you place on your blog. (For an example of a campaign I recently ran, see my blog about crisis communications at http://gluck.advisorblogcentral.com.)
GoToWebinar, which is offered by the same company that sells GoToMeeting, costs $99 a month or $948 a year if paid up front. If you cannot write a blog because it requires too much effort or if you feel more confident about speaking publicly instead of writing, then Webinars are great. Once you get the hang of it, you can run a Webinar weekly-or daily on very bad or very good days-to sum up breaking news and market statistics with a group of clients. Better still, invite prospects! Recordings can be made available on your Web site. You can also choose to take questions from participants or questions can be typed in by participants and only you see them. You can cherry-pick these questioners, too, giving them permission to speak to the full group only if you choose.
Press Your Case. The local press needs to hear from you. Write an op-ed piece or letter to the editor explaining what you are doing for your clients now, how independent advisors are different from brokers at Wall Street firms, or some other topic related to the crisis that you feel strongly about.
Call reporters and offer to be a source. Chances are you'll get the reporter's voice mail. Leave a message saying you want to be interviewed about what you are telling your clients now.
One good way of getting into your local paper is to offer a new client a free financial plan if he'll let you cooperate with the press on a story. Newspapers love to publish "financial makeover" stories. If you do a case study about remaking the portfolio and financial plan of a new client who quit his broker to come to you, it will get published. Often the client's name can be kept out of the story, though most newspapers will want to get the client's name and photo.
And if a reporter calls you, stop what you're doing to take the call. If you don't, reporters will look elsewhere for information. Reporters call sources who make themselves available whenever needed because they're almost always on a tight deadline.
Andrew Gluck, a longtime writer and journalist, is CEO of Advisor Products Inc. (www.advisorproducts.com), a Westbury, N.Y., marketing company serving 1,800 advisory firms.