When the stock market rises, everyone considers themselves a genius. This environment can make it tough for advisors to get new clients. Unfortunately, when the stock market declines, some clients blame their advisor. Down markets can provide a good opportunity for advisors to bring new clients onboard from the competition.
1. Handholding helps. Some advisors go dark when the market heads south. They use the logic “Let sleeping dogs lie.” A successful advisor in the Boston area would come across people who complain about the market, more specifically their performance. He would ask: “When was the last time you heard from your advisor?” They would answer and he would follow with “In difficult market conditions, we try to be in touch with every client on a monthly basis…” He is setting a service standard. Is their current advisor above or below the threshold.
2. Putting events into perspective. An advisor in our local area with a focus on financial planning might hear a client complain about the market and the decline in their net worth. His key strategy is to focus their attention on the long term. He might say: “If a year ago I told you interest rates would rise to X%, inflation would be running at Y% and there would be an ongoing war in Europe, where would you predict the stock market would be?” He then shows the decline is not in line with what the person’s worst expectations might have been.
3. Look for people with a problem. Many people have faith in the long-term health of the stock market. The problems develop when clients feel they aren’t getting attention or their money managers are not doing that much. In the category of “Who do you know…” another strategy is to ask clients “Who do you know that is using professional money management (managed money) elsewhere and is dissatisfied with the relationship?” The expression is vague enough that it becomes all encompassing. People could be dissatisfied for all sorts of reasons. This is followed by “I would be interested in speaking with them.” Notice you did not say you could do any better, you simply said you would be interested in talking.
4. Responding to “I already work with an advisor.” This happens all the time. You meet someone socially. They ask, “What do you do?” If you say “I’m a financial advisor,” they might counter with “I already work with one.” A strategy to anticipate their answer and continue to lead the conversation might be: “You probably work with an advisor already.” Now you can set a standard for measurement. “It’s been a difficult last few months in the stock market. If your advisor has been there for you, returns calls and keeps in touch, that’s about as good as it gets.” If they agree, congratulate them on having a good advisor. Change the subject. If they disagree, suggest “There may be room for improvement…” There is your opening.
5. When people are convinced everything is going down. As of 9/23/22, the S&P 500 was down about 23%. Many people would assume all 500 stocks in the index are down 23% each. Others might assume all 500 are down by some percentage. According to slickcharts as of 9/23/22, 89 of the 500 stocks were in positive territory YTD. Seventeen were up over 25% and two were up over 100%. Investors need to look inside the indexes, not just at the overall numbers. Now you are an advisor who isn’t merely going with the herd.
6. Be an advisor with an opinion. When the stock market is doing badly, many people do not want to venture an opinion. Some take a “let’s wait and see” approach, quoting popular strategists who are vague and also do not commit themselves. Do you have an opinion that you can back up concerning what are the major underlying trends driving the economy? If this is correct, how should things look in five or 10 years? Is it likely any of these major trends will disappear or are they here to stay? You cannot accurately predict the direction of the stock market in the short term, but many people are natural optimists. Investors like advisors with vision.
7. Dollar cost averaging. You have a prospect who admires your conviction and positive attitude. They might currently have an advisor who isn’t committing themselves. They are agreeable to doing business with you but are scared. Dollar cost averaging might be the answer. It’s like walking into a swimming pool from the shallow end, one step at a time and gradually acclimating to the water vs. hurling your entire body in at the deep and. Making a small commitment on a regular schedule can help build confidence. Your prospect is likely already doing this with their 401(k) scheduled contributions.
You do not want to make far fetched predictions you cannot back up with research. You do not want to deride the efforts their other advisor(s) is making. You do want to establish yourself as a confident alternative.
Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book Captivating the Wealthy Investor is available on Amazon.