Are you confident about the future of your practice? Would you like to know what actions other financial planners are taking that give them confidence in the face of a depressed economy and volatile market?
In September 2009, FPA surveyed members for its study, A Year After the Market Crash: How Financial Planners Are Adapting to a New World. A surprisingly large percentage of respondents (56.5 percent) said they are more confident now than they were before the October 2008 market crash.
Here are some of the key areas associated with greater adviser confidence:
- Operate more efficiently. Confident planners were more likely to say they operate more efficiently now than they did before the crisis (56.7 percent). "Streamline and simplify," summed up.
- Get a handle on client risk tolerance. Planners with greater confidence tended to be those who had a better experience with their risk tolerance tools/processes—75.2 percent of confident planners rated their risk tolerance tools and processes "good" or "excellent." Discuss risk thoroughly and candidly with clients. Don't rely on simplistic questionnaires. "Client appetite for risk is not as great as they think," said one survey respondent.
- Review your policies. Confident advisers are more likely to have implemented new processes/policies/requirements for new clients as a result of the crisis. Take time to manage new clients' expectations and clarify investment policies. One adviser now makes portfolio asset allocation modeling mandatory for new clients. "All new clients will have to hire us to complete a comprehensive financial plan and not just hire us for investment management," said another.
- Personalize your communications. Confident planners are more likely to use e-mail and meetings to communicate with prospective clients. "Communicate on a personal level during the highest volatility, not with broad newsletters or general letters," one planner told us.
- Lead panicky clients back to the plan. More confident planners (56 percent) recommended that clients invest more money into new or existing accounts in February. One adviser said, "Clients are looking for leadership through a crisis, not panic-driven trading."
- Stay the course. Confident planners are less likely to think Modern Portfolio Theory failed—56 percent of them said it did not fail in 2008. Among the survey responses: "Diversification still works."
To learn more, visit FPA's A Year After the Market Crash Web page.