If there’s ever a time when financial advisors get to stress-test their communication skills, it’s when the stock market tumbles seven consecutive days and produces losses of nearly 11.5%. That was advisors’ reality as of last Friday.
The Dow roared back on Monday, but where the coronavirus disease 2019 (COVID-19) will go next and what its eventual toll will be is anyone’s guess. So far, health officials say the virus has infected 90,000 people, killing more than 3,000 worldwide. American authorities have reported a total of 90 cases nationwide, with six fatalities.
While the unpredictable nature of the virus and its impact on markets may make communicating with nervous clients challenging, advisors told Financial Advisor they have been quick to calm client concerns and often had silver linings to report.
“This is an opportunity for us, with the markets being as volatile as they are, to tell clients we are harvesting losses in taxable accounts and rebalancing portfolios,” says Ian Harvey, an advisor with Bridgewater Advisor LLC in New York City. The firm manages $1.2. billion in mutual funds and ETFs for high-net-worth individuals with portfolios north of $2 million.
“A handful of clients have called the office and we have sent one communication about the virus,” he adds. “But we are strategic portfolio managers and are not making tactical decisions based on this virus or any other single event. We work to capture long-term growth and that’s what we communicated.”
Smart advisors should use market disruptions to leverage effective communication that elaborates on the services and benefits clients are receiving, says Marie Swift, founder and CEO of Impact Communications.
“Times of fear and uncertainty—like we are seeing now—provide advisors with a great opportunity to underscore their value,” she says. “Most clients do not really understand what the advisor does on a day-to-day basis, so being in touch now can help reassure them that you are on top of things. Communicating with authority and a sense of calm is essential right now."
At Left Brain Wealth Management in Naperville, Ill., Freddy Garcia, president of investments, says he spent last week drilling down into each stock position the firm holds in its 31-stock portfolio in order to clearly communicate the firm’s strategy in the wake of the sell-off. “As the breakout of the coronavirus hit the markets swiftly in a negative way, we revisited every position we own for clients,” he says.
That led Garcia to sell the firm’s position in Carnival Cruise Line, which he has discussed with some clients. “We made that change and sold off a position in Carnival that we felt would have taken a lot longer to recover,” Garcia said.
In contrast, he strategically held onto Boeing, a stock he uses as a value play and which a number of clients asked about. Despite it being an aviation stock, it’s near-monopoly position as a publicly-traded plane builder should mean it loses less value and rebounds more quickly, Garcia says.