6 Ways to Take Control When Times Are Tough

David I. Leo 

Times are tough, but chronic worrying doesn't help. By focusing on what you can control, you can help your clients regain their equilibrium and lead your business forward, despite the uncertainty.

What's real?

While I am not a historian, I have lived through every recession and, more enjoyably, every expansion since the Great Depression. Here's what I remember:

When I think back, I realize my family and I always managed to have all our needs met. I think about psychologist Abraham Maslow's hierarchy of needs—and I realize we managed to continue to meet our needs on all five levels of the hierarchy, no matter what the economic climate.

Sure, there were lapses and shortfalls in jobs and income at times, but we always had our values and our family. We always had respect for each other. We always had our innate intelligences, our creativity, and an ability to meet life's challenges head on and make the best of it.

It seems to me that while we may have felt one way—downtrodden, recessed, or depressed—for the most part this was only how we felt. It was never who we were. Nor is it who we are today.

These down periods in the economy have always resulted in less spending by American consumers. Some would say reducing spending is an "it's about time" response, but regardless, as people feel poorer, they often act poorer. Spending less is generally a good thing, so long as we don't start acting poorly toward ourselves by thinking less of ourselves because money is tight, or lose sight of our core values.

Spending less negatively impacts the economy in the short term, but in the long run, it is likely a good thing. As we know, individual debt is too high in the U.S.; we have a negative savings rate, and we can no longer live off of inflated real estate equity.

What can an advisor do?

One of the most important things we know is that we have very little control over the economy itself. So, what can we do? The answer is to control what we can control.

Almost as an aside—because you already know this, right?—I'll mention that client conversations are of immense value. Revalidate your client's risk tolerance and make adjustments accordingly. You may want to tweak some portfolios as appropriate or to take advantage of certain opportunities as you see them. The idea of some portfolio adjustments may be a good one, but it's not clear that fundamentals are driving valuations.

Here are some things you can be doing proactively and with confidence that they're the right things to do:

1. Maintain communication. There have been many articles and much advice suggesting that you call your clients. I won't belabor this point. If you are doing it, good. If you're not doing it, you should be ashamed of yourself.

At this time your work is to continue contacting, empathizing with, listening to, and coaching clients through any specific issues they may have—real or imagined. Your focus should be client care and retention. Enough said.

2. Reassess income needs. Some of your clients may be on a fixed or relatively fixed income. It's important to know the extent to which their portfolio income has been impacted and whether they have withdrawal needs in the near term.

Ask clients about, and discuss their income needs and how they have been affected by the downturn. If they have not been impacted and they don't have major withdrawal needs in the near term, they may not really be adversely affected on a day-to-day basis. To help them see the big picture, offer your clients an income and expense analysis.

The important point is to help clients understand that they can control expenses and to some degree their portfolio income by changing the portfolio to create a retirement paycheck.

3. Provide prospective. This economic environment wreaks havoc on your psyche and your clients' psyches.

To counteract this fear, consider in your conversations that valuation may not be the key issue—it may be income. If a client couple was worth $10 million and lost $3 million, how does that affect their lives? What can be done about it, and when? Work together on the potential answers.

This is your real value-added work, not picking a mutual fund. If a client was worth $1 million and lost $300,000, how will that affect her life? What can be done about it, and when? A $150,000 portfolio that shrinks to $100,000 will not make clients happy, but in reality, will it really change their lives?

Help clients get perspective on their losses and realize that their lives are still intact, even if their investments have shrunk considerably.

4. Extend a hand. It's a very good time to offer clients second opinions for others in their family who may want a professional to review their portfolios and income concerns.

This is an anxious time when investors may want a second opinion, and people may be thinking about changing advisors. Tell your clients that if they hear a friend, colleague, or family member complain about their advisor—or just the current state of the market—you'd be delighted to chat with that person without any obligation or expectation.

partners, employees, employers, friends, or even spouses.

5. Focus on life issues. Understand where your clients are today with regard to their families, their health, their lifestyle, their business, their community, their home, their finances, and even their spiritual lives. Find out about their dreams. Find out where they want to be three, five, and 10 years from now in each of these areas. Understand how the current market conditions impact their whole lives, not just their money lives. Put money in the context of life, rather than viewing life in terms of money. Many of us don’t do enough of that.

6. Build professional relationships. If you can, make it a point to get out of the office to meet the COIs, especially the CPAs and estate attorneys of your best clients. Build those relationships so that in the future you can get introductions. This would be a state-of-the-market meeting, not a selling meeting. Give now and perhaps you will earn an introduction later. Getting together over meal functions is a great way to keep it convivial while you are making connections that may pay future dividends.

As my dear departed friend Hal used to tell me, "Give up all hope for a better past—but your future is spotless." Hal also reminded me not to try and run a 100-yard dash in a 95-yard gym.

There's a time for everything. With patience and fortitude, we'll get through this tough spot and look back on it as one of those periods when we learned how really strong and smart we could be by applying ourselves to the tasks at hand.

David Leo is founder of Street Smart Research Group LLC., and is a coach, consultant, and trainer to financial professionals. David has recently merged his coaching practice with Focus Partners, LLC, a leading practice management and coaching firm (www.focusvpm.com). This combination will provide current and future clients of both firms with a wider array of coaching and practice development solutions. His work appears regularly in Horse’s Mouth (horsesmouth.com). David works with advisors and firms who want to build their businesses by attracting, servicing, and retaining affluent clients. He is available to answer any questions about this article and offers a free consultation to all subscribers of this newsletter. Contact him at davidileo@earthlink.net or david@focusvpm.com, or call 212-598-4229.