As the Coronavirus pandemic has caused significant economic disruption around the world, financial advisors have been faced not only with the daunting challenge of not only how best to stay abreast of the rapidly evolving legislative landscape offering assistance to individuals and businesses in need of financial relief but also in how best to assess which clients are most urgently in need of response and critical financial care.

In our 33^rd episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards talk about these challenges, and how despite the deluge of new legislation evolving seemingly every week, the most important thing for advisors to do during these difficult times is to maintain confidence as the experts and leaders that their clients rely upon (whatever the requisite expertise of the week may be). Because the confidence of an advisor doesn’t need to based on a mastery of the current legislative provisions available to clients alone; instead, linking one’s confidence to the ability to engage with the client – in the process of meeting with them, understanding their problems, and then developing a solution – is more effective, as these are the aspects of the relationship that clients ultimately value most.

This is not to say that the information itself is not important; on the contrary, having networks (e.g., a circle of trusted experts who have collectively agreed to help each other find answers for their respective clients) and organized systems to obtain and share information (e.g., collecting relevant documents and website links, and then posting those resources to a webpage on your website that is available to clients as a resource) can help advisors stay informed themselves, and to disseminate crucial information quickly to clients who may be in critical need of guidance.

For advisors who have too many clients who need immediate attention such that they cannot get back to all of them immediately, a triage strategy can help them determine which clients they should help first. By ranking clients’ issues in terms of the risk of failure those issues pose for the client (but obviously not necessarily telling the client they are being ranked!), advisors can help clients tackle issues that are the biggest threats to their clients’ financial well-being. And by organizing a three-step communication system of 1) responding to all clients initially, 2) setting clear expectations around when they can get a deeper response (especially if the client isn’t ranked first in the triage-ranking system), and then 3) following through with each client accordingly, advisors can ensure that all their clients are getting the attention and service they need to stay successful.

Ultimately, the key point is that advisors have access to networks to help them keep up with new information being released on a daily basis, and also easily accessible tools that can help them share that information quickly with their clients. More importantly, though, advisors should remember that, while clients may value the technical information their advisors provide to them, the real value clients derive from the relationship is their advisors’ ability to engage and connect with them, and to provide the leadership they need to stick to their financial plans!

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Now that the initial shockwaves of the coronavirus pandemic have passed, and individuals around the globe are adjusting to the current state of affairs, financial advisors are immersed in the process of updating clients’ financial plans to understand whether or how the recent market volatility has actually impacted them. As while the perpetual message for clients inclined to panic-sell has always been to ‘stay the course’, the reality is that, at some point, the market decline is still severe enough that at least some course correction in spending may be justified to appropriately address how to proceed in the aftermath of the down market we’ve experienced. Which in turn raises the question of how to ‘break the news’ that a spending adjustment might be necessary… and whether the discussion of focusing on spending (that can actually be controlled) may actually help further alleviate client fears.

In our 32nd episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards talk about how financial advisors can introduce discussions about sometimes-necessary spending changes, and why strength, empathy, and confidence are so important throughout the process. As importantly, even though some advisors who have stood by and defended the plans they have created for their clients may experience feelings of guilt for needing to tell their clients that some course correction is now appropriate, it is vital to remember that their clients’ financial plans have probably already accounted for the possibility of disastrous events and that these course corrections are to be expected (and may in fact be less severe than what clients fear).

Accordingly, it is not necessary for advisors to assume a defensive position out of guilt that the original plan actually does need to be adjusted; instead, they can position themselves as supportive guides for their clients, acknowledging that the turbulence has been scary, painful, and difficult, but that ultimately, they are available to work together to help the client identify if (and how) their plan needs to be adjusted. In other words, market turmoil presents an opportunity to reinforce that the financial plan is not necessarily intended as a rigid solution set in stone; rather, it is designed as a roadmap to reach a destination, and that course corrections along the way are to be expected, as ‘unpredictable’ obstacles do inevitably arise.

For clients who need to reduce their expenditures, it can be useful to point out that small, permanent cuts are generally more effective than drastic (albeit temporary) cutbacks, which can help the client maintain a better sense of control over their situation. Illustrating various ‘what-if’ scenarios (simplified by many financial planning software tools) can also have several advantages, as the process can help clients understand not only all of the different variables that can be leveraged to adjust the current projections made in their plans but also the tremendous impact that small-but-permanent long-term changes can have on their plan.

Additionally, what-if planning scenarios can be used to establish the triggers that would justify a(nother) plan adjustment (e.g., a 5% spending cut will be implemented if the portfolio falls below one threshold, or a 10% cut if a lower threshold is breached), which in practice can be helpful to alleviate clients’ anxiety (to know it’s 'only' a 5% or 10% spending cut), and to give them a sense of when it actually is important for them to check in with their advisor (and in the meantime reducing fearful phone calls and emails).

Ultimately, the key point is that financial advisors can best support their clients by proactively guiding them through the adjustments needed to keep their financial plans successful, and clarifying that these adjustments are not only normal, but also that they are not an indication that the plan has ‘failed’ and instead simply that course-corrections are a part of the process in the first place. And by practicing rational overconfidence to reassure clients, advisors can communicate that the financial plan is a tool to help them figure out what adjustments to make to stay on course, navigating the unexpected-yet-inevitable roadblocks and obstacles that arise from time to time.

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In the midst of the global coronavirus pandemic, people around the world are experiencing tremendous stress and anxiety, and financial advisors are fielding worried calls and emails from clients who need to be calmed. Yet the reality is that financial advisors aren’t immune, and are also dealing with exceptionally high levels of stress, both in being on the receiving end of clients seeking reassurance or looking to vent, and facing their own business stress in these times of extreme uncertainty. And in dealing with these prolonged periods of stress, financial advisors, as with other professionals in high-stress environments, face the crucial challenge of taking care of their own health and mental well-being to avoid burnout.

In our 31st episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards talk about the stress that many advisors face today (especially as many of their clients look to them as “release valves” for their own anxiety), and share some wellness tips that advisors can use to manage these high stress levels.

The first step in managing stress is to simply acknowledge that the stress exists, that the conditions contributing to the stress are often a challenging part of our job that must be dealt with, and that measures need to be actively taken to mitigate the impact of that stress on ourselves.

Some simple strategies that can help to reduce stress include basic breathwork exercises (such as taking a short break to take 10 deep breaths every 90 minutes during the day), regular exercise (taking a walk around the block), a good night’s sleep, finding healthy snacks (like no-butter popcorn or dark chocolate), and even just keeping a full glass of water within reach at all times to help stay hydrated. Because in times when everything feels out of control, having simple actions to remind us that there are things that we do still have the ability to control can be both mentally reassuring and emotionally comforting.

And even though each of these small ‘micro-actions’, by themselves, may not feel beneficial to or impactful on our health, doing them repeatedly, over time, can be effective ways to stay healthy.  Because not only will they help us create healthy habits in the long run and experience a greater sense of control in our lives, but making conscious choices that promote good health (e.g., walking, drinking water, getting a good night’s rest, deep breathing) can also help us avoid unconscious choices that are unhealthy or just serve to stress us out even more (e.g., stress eating, binge-watching or listening to alarming news all day, checking email and social media instead of going to bed at a sensible hour).

Ultimately, the key point is that as many financial advisors are currently facing high levels of ongoing stress, it is critical for them to maintain their own physical and mental health. By taking simple steps, advisors can protect their own health and mental well-being… while making sure that they’re able to continue to provide great service for their clients!

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As financial advisors everywhere are fielding phone calls, emails, and meeting requests from clients who are stressed out about the current global economic and health crisis, and also (understandably) about the safety of their retirement accounts, advisors are once again in the position of conveying confidence and reassuring their clients that the best course of action, as history has proved itself time and time again, is to stay the course and stick to their financial plans. But given the seemingly unprecedented nature of the coronavirus pandemic, how can advisors convince their clients to stay the course if they themselves have their own (natural) nagging doubts and concerns, not only for their clients, but for the viability of their own businesses, and whether the coronavirus pandemic really will be resolved in a timely manner and not compound into something even worse?

In our 30th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards talk about their experiences in dealing with past bear markets and financial crises, and that no matter how different these events have started out in the beginning (with each event’s seemingly ‘unprecedented’ nature at the outset) or how destructive the events may have been as they ran their course, history has consistently repeated itself with respect to how these events have always ended: they eventually wind down and pass, things regrow, and life returns to normal. Yet, even so, especially in times of crises, it is sometimes impossible for individuals – even for financial advisors themselves – to be 100% confident that, even in the end, things will turn out okay.

In other words, it is normal for even advisors to experience at least some small level of doubt and fear about our now-more-uncertain future; yet, even so, we persevere through that doubt and continue to reassure clients that things will ultimately be okay,  trusting in the likelihood of a good outcome (based on the weight of historical evidence) much more than the fear of a bad outcome.

This practice of ‘rational overconfidence’ – being perhaps a little “overconfident” based on the available facts and still-limited historical data, but rationally so as a way to be a leader for our clients – is often best, simply because for unprecedented events, there usually is no truly feasible alternative plan other than staying the course, which makes the original plan (based on research using 95+ years of stock market data) the most logical (or “only” viable) course of action.

Which means that while it may not actually be possible to completely quell the doubts we as advisors may still have about future uncertainty, it doesn’t have to stop us from trying to convey confidence to clients to help them stay the course, and recognizing that often doing so is still better than any other potential alternative. In fact, asking questions such as, “How frequently in the history of modern markets, has that [alternative] solution ever really made sense? And would it really make sense to forsake the original financial plan, which can involve a whole restructuring of goals and long-term assumptions, for something that makes sense for probably just a fleeting moment in history?” can help both advisors and clients re-focus and dampen some of the alarm.

Ultimately, though, the key point is that advisors are just as prone to fear and doubts as their clients, and it is perfectly normal and okay to have those feelings of fear and doubt in the face of such uncertainty. More importantly, it is critical for advisors to acknowledge those doubts, to give them space as valid concerns, and to understand that while doubts are a natural human response to uncertainty, advisors can (and should) practice some level of “rational overconfidence” with their clients. Because in the end, clients rely on their advisors to be a confident leader during difficult times!

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Over the past several years, the media has paid plenty of attention to the so-called "Savings Crisis", as a disproportionate number of Americans haven’t saved nearly enough to handle unexpected emergencies, much less generate sufficient cashflow in order to retire. However, there’s a flip-side called the “Epidemic Of Spending”, where retirees who have been frugal for (literally) decades and have diligently saved for their retirements suddenly start spending and even dangerously splurging… potentially to the point of no longer being able to sustain the original retirement goal they so effectively saved for in the first place. Sometimes, such tendencies can be attributed to a desire to ‘just live a little’, but other times, overspending may arise for reasons other than just being faced with the temptation to splurge – for some clients, significant life events can change long-term goals and precipitate dramatic changes in spending habits.

In our 29th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards talk about ways to manage conversations with clients who may be spending at unsustainable levels and are in danger of jeopardizing their own goals, and how important it is to understand why clients may have changed their spending habits in the first place. Notably, the most straightforward path for advisors – simply telling clients that they’re being unreasonable and that they can’t continue spending at their current levels if they want their plan to work – can result in the client simply hiding their spending from their advisor in the first place.

Instead, the importance of connecting the “no” to a bigger “yes” can help clients see a path down from the ‘branches’ of emotional decision-making back to the foundational ‘roots’ laid out in their financial plans – in other words, telling a client they need to reduce their spending should tie to their bigger financial goals that they initially identified were most important to them.

However, it’s also important for advisors to conduct conversations around spending with empathy and objectivity. Because it’s possible that changes in spending behavior are not a result of reckless irresponsibility, but instead a result from a deeper reason, such as a (not-yet-disclosed) terminal illness diagnosis, or the loss of a loved one.

When the cause of erratic spending habits is unknown, advisors can use a three-step process to better understand what may actually be happening in the client’s life that is causing the behavior change. The first step is to restate the fact pattern based on observations made by the advisor and information obtained from the client (e.g., how much is being spent each month; what the initial financial plan goals are/were); step two is to identify the story from the advisor’s viewpoint (e.g., spending at this level will deplete assets by age 70, versus age 95 as originally planned for); and step three is to ask the client to help clarify what’s really happening, offering a safe space for open discussion without judgment.

Ultimately, the key point is that, when clients exhibit unusual spending behaviors, there can be a range of different explanations. And by delving into those reasons with an objective, empathetic approach with a goal of truly understanding any possible mitigating factors, advisors can help clients either get back on track with their original plan or craft new goals to accommodate whatever changing needs they may have.

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Just about every financial advisor is intimately familiar with the overwhelm induced by an overflowing email inbox. From emails from clients inquiring about basic service requests and financial plan priorities, to team members scheduling staff meetings and service meetings, not to mention the plethora of industry newsletters, helpful educational blog updates, networking group announcements, wholesaler product reviews – on top of all the outright spam – can easily amount to hundreds of emails coming in on a daily basis!

And in addition to simply finding the time to keep up with just looking at all the email that comes in (and reading at least some of them), financial advisors also find themselves responsible for dedicating large chunks of time to actually responding to emails. Which can make it seem nearly impossible to keep up with the deluge of information that comes into an advisor’s email inbox every day! Fortunately, though, there are a few ‘tricks’ that can help keep things under control.

In our 28th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards talk about some simple strategies they use to manage their own own sometimes-overflowing email inboxes, and the cognitive relief that a well-organized (and well-managed) email inbox can bring.

For instance, Michael has specifically configured his own system to manage the tremendous volume of email that comes in on behalf of the blog. Specifically, he has implemented a system of multiple email addresses (to route inquiries by category to different team members), inbox folders with Outlook-based “Rules” to sort email into them (for separating out newsletters to review, informational items requiring no follow-up, and follow-up items that are low- or high-priority) and a routine where email is reviewed on a daily basis.

Delegating email management can also be a very effective means to stay on top of large volumes of email, especially for busy advisors who don’t have time to review every message that comes in. An executive assistant not only can ensure that spam messages are kept at a minimum, but can also make sure that high-priority items get a timely response and, depending on the level of responsibility delegated, can even send responses on behalf of the advisor. They can also ensure that any messages that can (or should) be delegated to another team member are routed as quickly as possible.

There are also some tech tools that can aid with email efficiency, such as TextExpander (for Mac users) and PhraseExpress (for PC users), which both quickly create template language for commonly repeated email responses (which can be most useful for advisors who aren’t particularly fast typists). Microsoft Outlook has a built-in feature that allows an email account owner to designate a second person as an Assistant, who can then access the email account simultaneously from a different computer to share the responsibility of sorting through email, and helping an advisor review only the messages they really need to see.

Ultimately, the key point is that having a well-managed, organized email box allows a financial advisor to spend less time on the distracting busywork that reviewing email can be, and more time to spend on tasks that require cognitive focus and concentration – like preparing financial plans and meeting with clients. Or even to enjoy more time with friends and family!

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Many financial advisors have asset minimums to ensure that they generate enough revenue from each client to be compensated appropriately for the value they provide (and the business cost to deliver it). But when it comes to having conversations about net worth with prospective clients to find out if they qualify for those minimums – especially those who are friends and family - the situation can quickly become awkward given the highly personal relationship individuals have with their money.

In our 27th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards talk about some ways to broach the sensitive and potentially difficult conversation about assets and net worth with prospective clients, and how to gracefully defer from taking on prospective clients who don’t meet the firms’ requisite minimums. Because even while the natural inclination for many financial advisors is to help anyone who asks, regardless of net worth, doing so often becomes increasingly difficult as an advisor’s firm grows and the capacity to spend time with clients who don’t actually meet their minimum fees becomes smaller and, in many cases, non-existent.

The first issue to consider when requiring asset minimums is simply to recognize that it’s not always apparent who may qualify (or not), which means it’s crucial to meet with prospects, conduct an initial discovery meeting to learn about goals and values, and to get a rough idea of the prospect’s balance sheet to safeguard against making premature assumptions about what the client is really worth. And in the event that a client does not meet the firm’s minimums, the advisor can still conduct a brief follow-up meeting to provide a few basic recommendations and resources to the prospect without much effort, and then describe to the prospect what the firm’s typical clientele generally looks like and what the minimum fees are… a simple act of goodwill to help the client, and also an effective marketing strategy, as prospects who are grateful for the guidance they received from the advisor may still be able to refer people in their network who are appropriate clients (having been given a description of who the firm does work with, in the process of being helped themselves)!

However, while spending time with prospective clients and running through a complete discovery meeting can be a rewarding process for both the client (for the free guidance they receive) and the advisor (for the opportunity to help someone in need and the creation of a new, potential referral source), it is also a time-consuming process and an advisor’s capacity may not often permit them to meet with all prospects without some screening mechanism in place. One potential remedy is to help people better understand who the firm works with before even reaching out to the advisor… which can be achieved through the firm’s website. Details about the typical clientele or specific niche served by the firm, together with the firm’s asset minimums and fees published directly for all to see, can help deter unsuitable prospects from reaching out to the firm in the first place (effectively allowing them to self-select out themselves). And including some potential resources (e.g., books, white papers, etc.) for individuals who may not be a good fit can again leave the individual with something of value from the firm, even though they may not be a suitable client.

Ultimately, the key point is that even though the ‘required minimum’ conversation can be awkward, there are ways for financial advisors to have these discussions as a meaningful discovery process that can even serve as an effective marketing strategy… and even (briefly and time efficiently) help those who might not be ideal clients in the process. Furthermore, maintaining a website that includes a profile of the ‘ideal client’, together with a clear description of the firms’ fees, can also keep discovery meetings with prospects who are unable to meet the firm’s required minimums to a manageable minimum!

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Clients often worry about how “the market” may be doing at any given time, which is understandable given the assets they may have invested there. However, there are times when some clients (particularly those who experienced the worst of the financial crisis a little over a decade ago)  completely lose faith in the entire economic system altogether and want to abandon their financial plan to go all-in with a  ‘bunker portfolio’, investing solely and entirely into select assets (like gold) that they feel will ‘save them’ from the risk of an overall failure of the entire economic system.

The fear that stokes the bunker portfolio goes beyond the typical concern over bear markets or periodic market volatility – it is based on a deeper fear and doubt about the entire foundation of the economic system. And for financial advisors working with such clients, the challenge is in helping them understand that, despite inevitable economic cycles, shifting their portfolio to ‘bet’ on a complete collapse of the entire economic structure is itself a low-odds, high-risk bet, such that even with the potential risk, the best course of action is generally still to stick to their financial plan and stay the course instead.

In our 26th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards discuss how to communicate with clients with extreme distrust of the economic system as a whole, as contrasted with temporary concerns over market volatility (in which case a different conversation around market timing needs to be considered), and present strategies to help those clients from making fear-based decisions.

The first step in talking clients out of the bunker portfolio is for advisors to confirm that clients appreciate the fundamental principles around risk and return and that for more than a century, equities have fared better than fixed income, and fixed income has outperformed cash.

Even so, clients may still feel beholden to escape-hatch strategies to avoid market catastrophe. In these situations, advisors can help them understand the value of diversification by framing hypothetical out-of-market portfolios as risk-based ‘bets’ themselves, considering whether the portfolio the client is proposing would stand the test of time. And by examining the data, the advisor can simply ask (and assess) how often (if at all) the proposed portfolio would have made sense and actually been an appropriate choice. Often, this is enough to convince the client of the merits of their original plan and to stay the course.

For some clients, however, no amount of reason will persuade them that the economic system is not actually about to fail. And while an advisor’s primary role is to help clients meet their goals and to clearly understand the impact of their decisions, the advisor must also consider the overall happiness or dissatisfaction the client may experience as they follow their recommended plan in achieving their goals. Because if the client doesn’t fully agree with their advisor’s recommendation, and becomes so stressed about going along with the plan anyway, the advisor’s plan becomes exactly that – the advisor’s plan, and not the client’s plan. On the other hand, the strategy that the client does want to pursue, in opposition to their advisor’s recommendations, may not be one that the advisor, in good faith as a fiduciary of the client, can stand behind. Accordingly, in such circumstances, the advisor may simply need to acknowledge that the best course of action would be to terminate the relationship.

Ultimately, though, the key point is simply that clients who have completely lost faith in the economy need to be on the same page with their advisor around assumptions and principles of the market for the client-advisor relationship to continue on a healthy path. Because, unless the client is in agreement with the basic assumptions on which their financial plan has been built, it may not be possible to talk them through their fear-based decisions at all.

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When market conditions become volatile and scared clients are on the verge of panic about the potential to lose even more money, financial advisors are faced with the challenge of talking their clients “off the ledge” from making a potentially disastrous investment choice to leap out of the market near the bottom and risk missing the recovery. Getting clients to actually stay the course, though, is easier said than done, as simply telling clients “Don’t panic!” doesn’t necessarily help them to do so!

Alternately, when the pendulum swings the other direction and markets are ramping upwards, clients can become overconfident and as natural greed begins to kick in… often asking for even more of their top-performing investments (regardless of the additional risk), and less of the poorly performing ones in their portfolios (that may have simply been the conservative diversifiers). Which introduces yet another challenging conversation, as telling clients “don’t be greedy” in the heat of the moment isn’t necessarily any more effective, either!

In our 25th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards revisit their earlier podcast discussion about how to talk clients off the ledge from ‘scary’ markets and then explore the flip side of the situation and how to keep clients from making bad decisions in the midst of a raging bull market.

Advisors can structure these ‘overconfidence’ conversations using a three-question framework, asking the following questions:

1. If you proceed with this decision and it works out as expected, how would your life be different?;
2. If you made this investment and you were wrong about how you expected it would do, how would your life be different?; and
3. Have there been things you were really certain about in the past that didn’t work out as planned?

Typically, clients will respond to these questions by acknowledging that if all things go as planned, there will be marginal (but only marginal) improvements to their situation (e.g., perhaps there will be extra vacation time or an opportunity to travel); however, if the outcome turns out badly, the consequences will be much more worse, often leading to disastrous circumstances that can involve severe losses (or even bankruptcy or divorce!). When faced with the third question, clients may realize that, while the positive outcome might sound appealing, there is a real risk of an alternative outcome having serious, potentially devastating effects, and that they can’t be ‘too confident’ about the good outcome as they recognize their own failed predictions of the past.

Often, this process is enough to help clients realize that, while the decision they are contemplating might sound like a good idea, it may not really be worth the risk involved – both the risk of a bad outcome in general and the risk that they are wrong about their ‘confident’ prediction it will turn out well.

But sometimes, a client may be too caught up in the appeal of a tempting opportunity and may want to proceed anyway. In these instances, advisors can re-connect the client’s focus to their ‘deeper yes’ – the important core values and goals they identified in their financial plan in the first place. If this approach still isn’t enough for the client to reconsider, then establishing a separate non-managed account can be an effective reminder to the client that the investment is separate from the plan, compartmentalizing the potential risk (and hopefully keeping the amount actually invested limited to a manageable minimum). On the other hand, if the client is dead set on going all in with the investment opportunity, it may simply be a signal to the advisor that it is time to part ways with the client… to avoid the ‘collateral damage’ that can, unfortunately, occur if clients harm themselves against the advisor’s advice but then still look to the advisor for someone to blame.

Ultimately, the key point is that the ‘overconfidence’ conversation is not very different from the ‘scary markets’ conversation; clients may simply need to be reminded that even though the markets may be doing well, making intentional decisions that stray from their investment strategies can throw their plans off course just as easily as a hasty decision made out of fear during bad market conditions.

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