Keep clients during a crisis

It’s 2008: some advisors are dodging client calls because they don’t want to have difficult conversations about how their investments and retirement plans could be in jeopardy. Not Dirk Hohmann.

While others are panicking, he’s calling every single client, asking how they’re feeling and discussing their options. “We all watch the news, and when you see it’s not good, what pisses [clients] off more than anything is if they don’t hear from their advisors,” says Hohmann, certified financial planner at Hohmann Financial Group. His average retired client was in a moderate profile; 60% fixed-income.

At the height of the crisis it went down 8%, news that was welcome relief to clients who’d expected to lose all their money. “I said, ‘What do you mean that’s good news? A year ago you would have fired me,’” Hohmann jokes. By dealing with those uncomfortable conversations head-on, Hohmann says he retained his clients—of 400, only one cashed out.

Rough patches

Solidity is important, since research firm Pollara finds the average advisor-client relationship lasts 18 years. It’s inevitable clients will go through many ups and downs, but how do you talk clients through an economic crisis, divorce, or health issue? Unfortunately, there’s no golden rule.

Elizabeth Taylor, a Calgary-based advisor at Sun Life Financial, says she’s a hugger. Nine-out-of-ten times, that’s how she comforts distraught clients. Last year, a client’s ex-husband committed suicide. Her goal was twofold: simplify the financial process, and console her client.

In many respects, the financial side was straightforward. Her client was still the beneficiary on the ex-husband’s $250,000 insurance policy, and the deceased had surpassed the standard two-year suicide clause. If he’d committed suicide within two years of purchasing his policy, his benefits wouldn’t have been payable. Also, even though his own mortgage was in arrears, the ex-husband had kept policy payments up-to-date to ensure his family was taken care of.

“Here was a guy who was on the edge, yet the one important thing was his family,” Taylor recalls. “I tried to get across to his ex-wife that, even though he was going through a hard time, he’d kept up the insurance for her and the family.”

Divorce is another tricky situation, and one of the most common, says Gábor László Vaski, senior financial consultant at Investors Group. He suggests being honest, explaining that if they both choose to remain your client you have an obligation to each. And if the husband tells you information that could affect the couple’s joint worth, tell him you can’t keep secrets as long as both parties are your clients, and they haven’t formally separated. In Vaski’s experience, once all assets are divided, one of the two often finds a new advisor.

Barry McNicol, senior vice president & investment advisor at The McNicol Team, Macquarie Private Wealth, recalls another situation. A couple, clients for more than a decade, seldom discussed their children. When he asked about leaving money to them after they died, it opened a floodgate.

He learned they had three kids, two of which didn’t get along with the third because he kept objectionable company. He asked if that child was responsible with money and if he could hold a job—both answers were no.

They expressed concern over leaving him an inheritance, worrying he’d quickly squander the money. McNicol explained they had enough capital to help a problem child without it hurting their retirement income. Together, they discussed hiring a lawyer and setting up a testamentary trust into the will*, allowing a trustee to filter the amount of money their son would receive at any given time.

Digging deep

Being able to read clients goes a long way. “Some clients are more open and you’ll be able to feel it,” says Taylor. “You have to have that instinct where you know whose going to get right down to business and who will want more small talk.”

Hohmann estimates in an hour-long meeting, he’ll spend about 15 minutes talking numbers. For the remaining 45, his conversation helps build an intimate connection. He’ll ask about what’s new in their lives, and if there are any ongoing issues. This often leads to discussions about their legacy where he’ll learn whether it’s important for them to leave money to family members.

McNicol concurs: If it’s the first meeting with a new client, focus on getting to know him instead of talking business. His favourite conversation starters include: hobbies and social interests; family; education; work experience; and travel. “Advisors should drop their own screens when they find something in common with the client. Share—it makes [the relationship] more human,” says McNicol.

For example, he graduated with a computer science degree, and lost his job at a computer firm that went out of business before he became an advisor. When downtrodden clients meet with him after being laid off, McNicol relates his own experience so they feel more at ease. This opens the lines of communication and ensures clients will talk more about their own experiences, or ask about his.

And while being an open book helps, there are some lines you shouldn’t cross when it comes to sharing personal information. “I never tell clients what I’m worth or what I make, but I’ll tell them I’ve had cancer or what my kids are up to,” says McNicol.

*The original version of this article did not mention a testamentary trust appears in a will. Return to the corrected sentence.