Regular engagement key to strong client relationships

Fiona Murphy looks at how advisers are managing their clients’ changing expectations in a volatile market.

Annuity rates fall to lowest ever levels! FTSE falls by 12%! The reports have been alarming over the past two months. Naturally, people panic that their retirement funds are quite simply trickling away. So are they flooding their financial advisers with questions? According to reports apparently not. In reality, the last few weeks have been business as usual for many advisers. Quiet even, but why?

The answer would seem to lie in the increased engagement many advisers have with their clients. Closer working relationships mean clients understand more about how the adviser is managing their money and so concerns are often dealt with before they become problems.

Sanlam Wealth financial planner, David Gibb believes in ‘educating' the client before imparting any advice. He recommends having a strong risk profiling system in place and talking clients through the implications of potential market swings. He aims to place a ‘client's mindset in a position where they think, OK, in the short term, it looks as if I've lost money, but long-term, the return should pan out.'

According to Gibb this regular communication can do much to soothe client nerves and can prevent them from taking snap decisions - for instance moving out of equities to perceived less risky assets such as bonds - which could negatively affect their retirement savings.

"It's a common query that comes up -on market timing," he says. "They ask is it a good time to make any changes? At that point you really need to explain how markets move and why they fall and the fact that the market's at a low point and the press make it out to be all bad news. You've got to enlighten them to the fact they are investing over the long term."

Advisers are using many different ways of keeping lines of communication open with clients. For instance, Almary Green's managing director, Carl Lamb advocates the use of regular newsletters to help clients understand current issues and so minimise any questions they may have. This approach is also advocated by Mount Sterling Wealth director David McLaughlin.

"We communicate with our clients regularly anyway through newsletters and face-to-face communication so you're always going to know those clients who are coming up to retirement as you'd already been having that dialogue and it's an ongoing thing," he says.

Upsides of a downturn

While market volatility may be a cause for concern, many advisers are actually using current conditions as an opportunity to review and re-position their client's portfolios for maximum impact.

Volatility can provide advisers with a vital opportunity to ‘step back', according to McLaughlin.

"It does present an opportunity to re-position portfolios in some ways especially if there is capital or there are assets which are underperforming or non-equity based assets that were underperforming that could be switched to equity based assets to take advantage as well," he says.

Likewise, Almary Green's Lamb has moved a proportion of funds from investments in bonds and gilts, back into the market, in a bid to make clients' money work more effectively.

Welcome changes

For many clients, tough times reinforce the benefits of having advice. Lamb has seen a rise in new business through client referrals, a sign that in testing times, the demand for IFAs is increasing. The use of an outsourced discretionary fund manager has also sharpened Almary Green's portfolio accuracy and increased the time staff can dedicate to their client relationships.

It is important to avoid viewing market crashes in isolation, or focusing on the short-term. Overwhelmingly, the message is, ‘we've been here before and we'll be here again', and advisers who engage regularly with their clients will be better placed to meet their expectations over the long term.