The Importance of Coaching
by Sheryl Rowling
In our last post, we talked about how to take a more sophisticated approach when it comes to assessing the risk tolerance of clients. In addition to the four factors that should be considered when determining risk tolerance, there is a need for constant coaching and communication. As we are seeing in the current COVID-19 situation, the uncertainty of the market has caused many advisors to panic, requiring consistent reassurance that their assets will be okay.
An investor’s biggest enemy is his or her emotions.
When it comes to their life savings, there are many emotional triggers for clients. Investors have a tendency to panic when their portfolio shows losses or doesn’t reflect the amount of growth they think it should. We have seen this in action when we look at the effect of COVID-19 on today’s market. As more and more businesses closed and employers were forced to lay off employees, investors began to panic at the impact this had on the market, causing them to pull money out. Logically, investors know that selling low and buying high isn’t the best way to invest, but they may struggle with fighting their emotions during such difficult times.
This is where your job as the advisor becomes crucial! Some may say that an advisor’s greatest value to clients is keeping them from making poor emotion-based decisions through constant coaching. In times like the ones we are experiencing right now, I find myself consistently reinforcing my mantra of “stay the course.”
Be proactive in your coaching.
When it comes to client communication, it is essential that you proactively anticipate concerns before clients even reach out to you. Again, we can use the current COVID-19 situation as an example.
Before the coronavirus had reached the level of severity it is at today, my firm was already researching the potential impact a global pandemic could have on our economy. At the time the Stay at Home order went into place in California, we had already sent two emails to clients, walking them through examples of previous epidemics and the impact they had on the market. Why did we do this? The answer is simple: we wanted our clients to see that we were aware of the situation and potential concerns that could arise as a result.
In the months since the Stay at Home order was enacted, we have sent numerous emails to clients, keeping them informed on the various programs available, new laws, and ever-changing deadlines. We have held two webinars on the subject of COVID-19. We have also sent out quarterly letters with information about COVID-19 blogs, changes to 2019 tax deadlines, and updates on market performance.
For the most part, our constant communication and coaching has yielded positive results. We have had very few clients reach out with concerns. We were able to speak directly with those who did and reassure them. On the whole, clients have expressed gratitude for our efforts on their behalf.
When coaching and communicating with clients, modesty does not become you.
When communicating with clients, you do not want to downplay the work you are doing for them. Let clients know when you have made lemonade from lemons or undertaken successful strategies on their behalf. They will have more trust in you as an advisor if you are up front about the quality of work you are doing to protect their assets.
During this period of market volatility, most advisors will recommend that clients “stay the course.” But staying the course does not mean doing nothing! Our firm has made sure to communicate to clients the positive actions we can take while they remain invested, such as rebalancing and tax loss harvesting. Thus, clients understand that remaining in the market during this turbulent time will help them to ultimately benefit on the up days and gain tax benefits on the down days.
As advisors, the one guarantee we can give our clients is that the market will be unpredictable. There is no way to know exactly what it will do in the future. However, with frequent coaching and communication, we can assure our clients that we are doing the best we can for them in any given situation.
We do not know when the global restrictions put in place due to COVID-19 will be lifted, or what the world will look like when they are. All we can do is let our clients know that we are doing our best for them now, and that we will be there for them with whatever is needed during the duration of this crisis. I think you will find that if you communicate with your clients proactively and often for the duration of this pandemic, you will find a marked decrease in the level of emotion-based decisions made.