Some clients like to win at any cost and will take great risks with their money. Others are so protective of their assets that it’s tough to get them to make even prudent investments.
Then there are those idealistic, sometimes naïve clients who like to invest in noble—some might say “lost” causes—potentially to the detriment of their personal balance sheets. Or, they just don’t take time to do careful investment planning at all. I call these clients “Survivors.”
As investors, Survivors tend to operate largely in the realm of “meaning.” Strong beliefs—in causes, people and certain values—often motivate Survivors to take unrealistic approaches to investing or to make questionable investments. Sometimes they forego careful investment and estate planning altogether because they get preoccupied with charitable, nonprofit or philanthropic work.
If you must deal with a Survivor client when the markets are in freefall, he may insist on hanging on to a certain stock (perhaps a sentimental favorite) even when you know they should sell it. In other cases, Survivors procrastinate on investment planning, preferring to stick with a portfolio mix they’ve had for years.
Motivated more by purpose and steadfastness than profits, Survivor clients often greet stock market setbacks with stoic resolve and a stiff upper lip. Such sentiments can cause them to become entrenched and resist logical advice about how to curb stock market losses in down markets.
So, what’s the best way for advisors to counsel Survivor clients?
1. Because Survivors are driven more by causes and personal values than profit in their investment choices, talk extensively with them about their values and investment philosophy. I’ll often ask Survivor clients to talk about their family values and the messages they internalized about money and wealth when they were growing up. “For what purpose do you see yourself using your wealth?” I’ll ask. “How do you want your investment approach to reflect your personal values?” Getting a sense of their personal values informs the investment options and choices I suggest to them.
2. Sometimes Survivors get stuck in the meaning domain. Conversations with Survivors can go on and on because they often have a lot of ideas about where they should (could) invest their money. As an advisor, I’ll talk with them, listen for themes in what they say, and then offer up investment recommendations based on the values and priorities they’ve shared with me.
3. Survivors can get wedded to their investment positions, especially if those positions are based on their assessments of market risks. Under normal, everyday circumstances, Survivors are good at data-gathering and fact analysis, which helps them assess and manage risks effectively. However, when market conditions change, they may find it hard to abandon earlier thinking and choices to meet new challenges. As an advisor, you may need to be assertive at times, telling the client, “I know that stock has been a long-time favorite of yours, but here’s some new information you may not be aware of regarding that stock’s valuation.” This will likely give you an entrée to revisit the mix of stocks in their portfolio.
4. Survivors often display “random” engagement styles. They can be all over the place when they talk with you about money and investing, so they need active direction, support and guidance in making financial decisions. Consider using budgets to help them organize and focus their thinking around investments and estate planning.
5. Survivors sometimes see themselves as lacking the ability to affect outcomes but will stick with a course of action nonetheless. Advisors need to be attuned to the tendencies of Survivors to persevere at all costs, when, in fact, it may be advisable for them to change tactics and course.
6. Be organized and structured when holding discussions with Survivors. Prepare a meeting agenda each time you meet. Give the client gentle deadlines by which to follow-up with you on topics you discuss. In some cases, you may need to take on added duties with Survivor clients (e.g., talking to their lawyers or accountants), but be careful about adding too much to your workload and offloading such responsibilities from the client.
7. Survivors tend to be loyal clients and will stay in situations that are not financially productive or useful to them longer than they should. You, as the advisor, must be proactive in selling stocks with poor prospects rather than sticking with nonproductive investments. If you have full discretion in managing the account, counsel the client about such situations when they arise. You may also need to weigh in on situations where you see the client being mistreated by a lawyer, accountant, family member or spouse. (Remember, they tend toward self-sacrifice even when it can be readily avoided.)
8. Listen carefully to Survivor clients who seem willing to sacrifice too much—or it all. For example, when they are willing to leave money on the table or don’t act to avoid losing money, advisors need to be ready to confront them and to inform them that they are not safeguarding their assets as they should.
Chris White is a long-time wealth advisor and author of Working with the Emotional Investor: Financial Psychology for Wealth Managers. (Praeger, 2016)