Four common client fears (and how to ease them)

Bryce Sanders, president of Perceptive Business Solutions Inc, looks at client fears and ways of overcoming them.

Sometimes it feels we are in a spectator’s market. Investors are standing on the sidelines, tightly holding their wallets watching the action unfold. They may cheer when the market rises but are resistant to investing more money.

Why? Often they find someone or something to blame. Until these objections are addressed their wallet stays shut. As an adviser you need to uncover the real issue then determine the message you want to deliver while avoiding saying the wrong thing. This leads to having a proactive conversation addressing the issue and recommending action.

GRIPE 1: Big city firms manipulate the market

Investors hear about investment banks, hedge funds and exotic derivative instruments they do not understand. During market declines, they imagine investment bankers making money as investors lose everything.

The real issue is probably: Can individual investors still make money over time? It is tempting for your clients to think of themselves as ‘the little guy’ trading odd lots. It is more likely they own shares of mutual funds or unit trusts. They may also have pension or retirement assets held at their workplace or with an insurance company.

The mutual funds, pensions, insurance companies and money managers holding your client’s retirement and other assets fit into this category. Several of those large investors are working on your behalf. The message you want to avoid is passing the blame along to the regulators. That will not lead to business or show leadership.

Now for the proactive approach: Do you really feel one firm has smarter people, better analytics or some advantage that gives them an edge? Which firm? Let us look and see if they also have mutual funds available to the public. If you really feel they are smarter, let us get them working for you. (Suitability is an issue.)

GRIPE 2: Blaming you and your kind

When investors think of ‘fat cats’ in the City, do not be surprised if they lump you into this category. You dress well. You make money even if the client loses money. What is the real issue: I do not want to be a victim. I want to earn a fair return.

They need to understand ‘We are all in this together.’ You are their neighbour. Your children go to school together. You are an individual investor like them.

Suppose the investor says: ‘A guy I know lost money in the market. Now he is suing his broker.’ It is easy to get defensive and say: ‘He probably understood exactly what he was getting into.’ That is the wrong approach.

Realise you do not have all the facts. This person probably does not either. Consider a proactive approach:

‘Did this adviser take advantage of older, unsophisticated clients, actively trade stocks on margin and stopped calling when things went bad? Maybe they deserve to be sued.’ This might be followed with: ‘If they prepared a financial plan together, established a risk tolerance, helped select and monitor money managers and the adviser reported frequently to the client, that is a different story. Which way would you prefer to be treated?’ You make the case you fit into the second category.