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The Bear in the Industry

Article after article in the trades are describing the despondency that RIAs are feeling over the economic downturn. And the depression they are feeling is probably justified. Just recently a Forrester survey shows that consumer opinions of financial services firms has fallen to an all time low. And in an interesting item is that banks and brokerage houses appear to have switched positions—with brokerage houses now ranking last place in holding consumer confidence. The research shows that only 29% of customers expressed satisfaction with full service firms. According to Forrester: “Among clients of independent financial advisors, 61% say their firms are minding their best interests this year, down from 67% in 2008.

The Financial Planning Association and the Personal Financial Advisors—two trade associations have been helping their members cope with their fragile emotional states by hosting conference calls to assist their then through the upheaval caused by the economic downturn. Some advisors are doubting every decision they have ever made, and some are reluctant to provide their clients with investment advice, fearing that they will be wrong. Others are overwhelmed by stress and anxiety as they not  only attempt to help their clients recoup losses, but are also facing the financial collapse of their own firms.

Faced with fear and doubt many advisors are not doing the exact things they should be doing: calling their customers and reaching out for new ones. Business development and marketing have disappeared as advisors are retreating from running their practices, too numb to face the daunting task of rebuilding portfolios and rebuilding their business. According to a survey by Oechsli Institute, a survey of 733 advisors found that only 3.2% of advisors brought in 10 or more accounts worth between $250,000 and $500,000, and only 20% of RIAs have increased their face time with clients. And yet with more people making the switch from one advisor to another- there are opportunities to be had. Job number one for advisors is to try to pull out of the emotional depression many are feeling and start proactively engaging with existing clients and new business prospects. A few rules to keep in mind:

Rule one: Keep your existing clients happy. It is harder to build up new clients than to continue to maintain an existing account.  Call them, often, or reach out via email or newsletters.

Rule two: Be empathetic. No one is blaming RIAs for the entire collapse of the financial institutions. But as the “giver of advice”  this is the time to be sympathetic to what the loss of funds means to clients. It is difficult to listen to stories of how lives have been altered dramatically due to the collapse of retirement plans or college funds. You can’t change or control the collapse, but you can and must listen and offer proper condolences.

Rule three: Consider repositioning yourself. RIAs that were promising huge returns are in worse shape emotionally than RIAs who were promising advice. Position yourself as an someone who is a financial planner—not an asset manager that boasts of the largest returns. Those who positioned themselves as long term planners are not as vulnerable as those who promised short term gains since no promises were made.

Rule four: The best time to market is when no one else is—when much of the advertising “noise” is dulled. But before you market anything, figure out what it is you want to say, and what your clients need to hear.

Rule five: Keep in touch. Whether it is maintaining a long existing client or cultivating a new one, in time of stress, people want to know you care enough to call and find out how they are doing. Strong emotional bonds lead to strong business bonds.

Rule six: People will be loyal to those who have been along for the ride during touch times. Advisors that are silent during this tough period will have a much harder time gaining the confidence of their clients when better times return. Through thick and thin people want partners, not only during the flush time.

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