How Do You Build Client Trust In Turbulent Markets?

by: John Lohr


Do not overreact -- research.

Your clients want you to hear them out and reassure them.

Communicate compassionately with every client; and listen to them.

How do you build client trust in turbulent markets? Like Brexit for instance? This too shall pass. In the last 87 years there have been five periods of US stock market declines that lasted over 12 months:

August 1929 to March 1933

May 1937 to June 1938

November 1973 to May 1975

July 1981 to November 1982

December 2007 to June 2009

The recovery rate was 100% in all cases.

Is Brexit a "game changer" and "unprecedented"? That is unknown, but highly unlikely.

So how do you use market turbulence to build your clients' trust?

A Vanguard Spectrum 2014 research report identified that the top reason clients pick an advisor "is that they believe the advisor is honest and trustworthy." Another Spectrum study in 2015 showed that the top reason clients change advisors is: "Lack of proactive contact."

With those in mind, here are 12 steps to building clients' trust in times of investment uncertainty.

1. First of all, in the words of Douglas Adams: "don't panic." You project uncertainty in your clients' minds, if you yourself are unsure.

2. Obfuscate any of your insecurities. Your client pays you to communicate. Some of your investment suggestions will be right and some will be wrong. Don't dwell on that factor.

3. Don't read mainstream media: USA Today, CNBC, Fox News, etc. They're in the business of marketing and selling advertising; fear and excitement sell advertising. Financial advice is a relationship business, so I characterize "Seeking Alpha" as referring not just to quantitative performance, but to the quality of your relationships with your clients.

4. At the same time, know what is going on: "Just the facts." Read both (or all) sides from trusted experts, not news readers.

5. Know what your firm says. Wirehouse firms have large analyst staffs and economists that are paid plenty to opine on these things. What are they saying?

6. What does your firm say you should do?

Calm and ease clients fears?

If you don't have large or good firm resources, read independent unbiased information like you find on this site, Seeking Alpha.

7. Understand: No one, repeat no one, knows exactly what the result of Brexit turbulence will be, or when it will be. No one.

8. Understand that markets feed on uncertainty and fear. Is it a buying opportunity or a wholesale time to fly to cash or gold? Usually neither. Buying in is for risk takers and speculators. Selling is for the fearful. Remember that for every buyer there is a seller. Do you think the traders executing on the 2nd floor computers in Atlanta (or wherever) are smarter that you? Rethink that.

9. Compose yourself and formulate your own opinion -- one that you can truly believe in.

Then and only then communicate with all of your clients. Every. Single. One. Of. Them. Be sure to take all of the phone calls from your clients, though.

They don't want to know what you think they should do. They want compassion. They want to know you're keeping your pulse on what is happening and, if necessary, will take some action of their behalf. They want to know that you care. Listen more than you talk. If you're composed and at ease, it will be reflected in your tone of voice -- believe me. Clients expect you to remain calm in crisis (or more likely, perceived crisis). That is a fundamental cornerstone of what their trust in you is founded upon.

10. Tell clients what your firm thinks or believes. Rely heavily on that.

11. Tell your clients that you and they together crafted an investment philosophy tailored to their goals and comfort zone, and you're going to stick to that. Clients want consistency.

12. Remind them that there have been only a handful of prolonged downswings in US markets in the past 87 years. Close by telling them: "Look, if you have any concerns or questions, call me anytime." Give them your cell phone number.

Today (Monday) the US market may go up down or sideways. You can't control that. Your firm probably advised you to stay the course. It's probably a good idea.

If you feel you have to do something, make some tactical moves that are well researched.

If you honestly believe that everything is gowing to hell in a hand basket, go ahead and react, but please remember your reputation and client trust hinges on your position. You own your decision.

More on the building of client trust as we go along.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.