Sponsored by Credent Wealth Management
Like death and taxes, recessions seem to be inevitable. Join CX Institutional’s webinar May 19th, 2020 from 3:00 to 3:45pm EST/2:00-2:45pm CST to learn how to turn the volatility of recessions into a business opportunity. Register at https://cxinstitutional.com/events/
According to CX Institutional Controller Justine Kuzniar, recessions apply a one-two punch to advisory practices: client needs go up at the same time revenue goes down. This means that service businesses cannot reduce staffing, although payroll tends to be the largest cost on the P&L statement. This creates a profit squeeze in a normally high-margin business. Someone once said that advisors are overpaid during bull markets and underpaid during bear markets. All of these issues highlight the importance of revenue and expense management in all markets, and maintaining a cash reserve. One piece of good news is that if you bill quarterly in advance, you have three months of notice about a revenue drop. That gives an advisory firm time to plan, retain earnings, and get ready for the income drop.
Other leaders of CX Institutional share ideas to turn the volatility into an opportunity to deepen client relationships and gain market share. Angie Lockwood, CPA, Chief Operating Officer encourages advisors to keep the focus on the client and be proactive. During market turmoil, clients need guidance, service, and assurance. “Call clients before they call you,” Angie says. You should also continue to leverage your Client Care Coordinators (receptionists) to keep setting appointments. It is important to demonstrate to clients that we’re continuing “business as usual” in providing service to them. Angie encourages advisors to adopt an ensemble approach to client service which allows the firm to:
- Leverage Paraplanners to handle routine service, and proactively update beneficiaries, banking arrangements and online account access.
- Leverage financial advisors (junior advisors) to make outbound calls to less complicated households.
- Owners or partners should double their outbound calls to the firm's most valuable households.
The firm's Chief Investment Officer, Edison Byzka, CFA®, suggests turning market volatility into a buying opportunity for clients, considering the following approaches:
- While making outbound calls to clients, encourage them to increase equity exposure where appropriate for their financial plan.
- Seek additional cash investments.
- These techniques can help shore up their financial plans and gives them something to "do" about the bear market.
- Utilize a centrally managed investment platform, which makes this process much smoother than trading one account at a time.
CEO, David Hefty, CFP®, suggests that advisors use their service as a wedge to gain market share. During periods of market volatility people talk to each other about investments, perhaps even more than when markets are soaring. He suggests that awesome service as described above can be a topic of conversation among satisfied clients and their family, friends, and co-workers. Advisors can use their enhanced service experience as an opportunity to be assertive about seeking introductions to individuals whose advisors aren’t proactive.
These leaders’ guidance can be summarized with the following points:
- Recessions have a real impact on our business; both financially and in the volume of work.
- Double up on your proactive contact. Since most advisors hide from the phone, you will be doing 4 times as much for your clients! Leverage your co-workers and develop an ensemble approach to client service.
- Encourage clients to add cash and increase equity exposure where appropriate. They often want to "do something" about the bear market and this is one of the best things they can do for the health of their financial plan.
- Turn the crisis into a business building opportunity for your practice and gain market share.
- If you aim to build a more effective client service model, ensemble approach or centrally managed investment platform, we're here to help. We offer both succession planning and merger options that allow your clients to receive a consistent service experience, and you can either retire or join an existing leveraged ensemble. We won't chisel you down on the value of your practice, either.
Register for the free webinar at https://cxinstitutional.com/events/
Contact us using [email protected] or call me at 269-532-1901.
John Knowlton, Director of Corporate Development for CX Institutional
Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through CX Institutional, a registered investment advisor. CX Institutional and Credent Wealth Management are separate entities from LPL Financial.
