A panicked client recently drove one-and-a-half hours to meet with Rick Lachine at his office.
“They wanted out [of the market],” says Lachine, founder of RLA Financial in St. Thomas, Ont.
The client had “done no planning in seven years,” he says. “I’ve made recommendations; they haven’t followed them.”
Lachine advised against the selloff, but the client went ahead.
Another client called with the opposite plan: deploy cash to buy low. Lachine again advised against the move, explaining to the client that they might need the liquidity, and that markets could continue to drop.
The client accepted his advice.
The two clients represent extreme reactions rather than the norm. Lachine says he hasn’t fielded a lot of extra client calls amid the coronavirus scare and subsequent market volatility. Establishing regular communication and portfolio liquidity ahead of the crisis has prepared most clients.
At the end of January and February Lachine sent out his regular monthly newsletters, which reminded clients that the market’s been overvalued, a bump could be on the way, and they’ve been through downmarkets before.
Lachine says he aims to keep clients informed without creating panic. No special communication was sent to clients about recent market volatility. He’s cautious about over-communicating, because clients say they become concerned when they hear from him.
Also, his clients likely feel secure because they increased cash holdings in recent years as markets went up. He typically suggests clients have three to six months of liquidity at minimum, he says, and most clients surpass that, with one to three years’ worth. (A bonus: many of his retired clients also have guaranteed minimum withdrawal benefits.)
Clients are likely motivated to establish a cash wedge because of the regular communication about potential market downturns. Lachine also shows clients statistics about the time period required to make up returns, so they know what to expect. “If your planning’s in order, there’s no need to worry,” he tells them.
Darryl Brown, investment planner at You&Yours Financial in Toronto and director of portfolio strategies for Spring Financial Planning, says he’s had an increase in client calls, with many of them asking if it’s a good time to buy.
“I’m walking people away from the buy button,” he says. “This isn’t a time to be focused on deploying new money.”
Brown says the aggressive investor behaviour likely reflects fear of missing out on a V-shaped market rebound, as happened to many investors after the 2008 financial crisis. (In 2008, Brown was a credit analyst with global rating agency DBRS.)
This crisis is different, he says. He tells clients to focus on their health and family, and how long they’ll need their emergency funds to last. “If you need to raise cash to reinforce that emergency fund, you should do it,” he says.
Clients are relieved to hear that message instead of being shamed about selling investments, he says.
With clients in their 30s, he’s particularly focused on emergency funding. Often, “They’re dealing with smaller sums [and] their overall employment security is not as high,” he says.
He also tailors his communication, even if it’s aimed at a general investor audience. He recently held a video conference call addressing the crisis that was open to anyone.
“It’s important for me to talk to people in a way that speaks to the impact to them,” he says, as opposed to contributing to information overload.
He considers what clients are anxious about and provides action ideas related to what they can control. That way, he “provid[es] insight, not information,” he says. Topics addressed during the video conference, for example, included mortgages.
Troy Iwanik, an investment advisor at HollisWealth in Vancouver, says he reached out to clients based on their reactions during previous downturns.
“I proactively sent some initial emails out to certain clients that I thought might be a bit more nervous,” he says. “People do need to be reassured — some more than others.”
Iwanik says he generally aims to communicate clearly, concisely and not too frequently, so he doesn’t contribute to information overload. Still, maintaining some communication is important because it can motivate clients to act.
“They might respond back to you with a comment and then you can focus on that particular client,” he says, adding that a client might need to reposition funds if they’ve lost a job.
Before the current crisis, Iwanik’s clients received communication to explain previous market corrections and the risk of trying to time the market. When speaking with clients, Iwanik explains that pension funds stay the course during downturns to maintain their long-term goals.
Clients who have already been through a downturn tend to be “steadfast,” he says. Having adequate liquidity also keeps clients from making poor decisions. Iwanik typically advises clients to have a year or two of cash on hand to weather crises.
Recent client concerns have focused on practicalities, he says. For example, clients have requested updated statements or asked about transactions in progress. Iwanik expects to receive more calls in April, when clients receive quarterly statements.
Depending on how current events play out, he plans to email clients about every two weeks. He says he’ll keep them informed of government support, including the extended tax deadline. Phone calls will depend on clients’ needs.
With people isolating at home, Brown suggests now’s the time to explore new communication formats, such as podcasts and webcasts.
“Make provisions to use one or a few different approaches to reach out to people,” he says. “People exist in more places and want you to meet them in different places.”