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Lessons from 2008 Helping Wealth Managers Cope with Current Crisis

Lessons learned from the financial crisis of 2008 and 2009 are serving wealth managers well as they—and their clients—confront a cascade of unsettling economic news from the Mideast and Japan.

Lessons learned from the financial crisis of 2008 and 2009 are serving wealth managers well as they—and their clients—confront a cascade of unsettling economic news from the Mideast and Japan.

“The angst of going through the experience of two years ago has generated benefits,” says Scott Slater, managing director, business consulting at Charles Schwab Advisory Services (NYSE: SCHW). “Advisors have gotten smarter about what activities they can do that clients truly value.”

Communicating a “clear and confident” message to clients, especially during a crisis, has been high on the list, Slater says. “They want to know, ‘Are you watching out for me?’” Advisors have responded, Slater says, by learning how to communicate with clients “quickly, pro-actively and with a clear message.”

Indeed, wealth managers credit their outreach programs with preventing clients from over-reacting to the latest drumbeat of bad news from the Mideast and Japan. What’s more, they say, clients remain upbeat and optimistic about prospects for the U.S. economy and stock market, consistent with results from two recent surveys by Schwab and Fidelity Investments.

WealthTrust-Arizona, for example, has been holding a series of educational workshops on the economy and investments in its Scottsdale offices with all of its wealth managers attending. As a result, says Paul Ahern, a principal at the firm, clients have been calling less in response to bad news than they did two years ago. In addition, there is “a level of optimism across the client base that we haven’t seen in a long time,” he says.

In the wake of the financial crisis, Silver Bridge Advisors has accelerated efforts to reach out to clients through its “Silver Bridge Institute,” an educational platform using seminars, workshops, white papers and research, according to president and chief operating officer Stephen Prostano.

Significant Focus on Communications
“We’ve put a significant focus on communication during difficult times,” Prostano says. “In addition to the Institute, we’re also doing private seminars and tutoring for families. Clients realize the world is both connected and fragile, but they remain cautiously optimistic and their reaction to events in the news is less volatile than in the past.”

Yesterday, Barry Glassman, president of Glassman Wealth Services of McLean, Va., sent an e-mail to clients reminding them that “while most of our portfolios have a healthy allocation to international stocks, we have been underweight Japan since last May.”

And tonight in Boston, Modera Wealth Management is holding an open house for clients that will serve as both an introduction to the firm after its merger with Back Bay Financial Group as well as a question-and-answer session on the economy and the markets. The open house is one in a series of economic outreach sessions that the firm has been putting on for the past year, says Modera principal Tom Orecchio.

“When we do review session with clients, they will ask us what we think about recent events, but we are not getting a lot of calls about what they’re seeing on the news, which I think is a good sign that they are taking things in stride,” Orecchio says.

In fact, more than half of the advisors surveyed in January for Schwab’s Independent Advisor Outlook Study said their clients felt more optimistic about the economy than they did in July 2010 and 56 percent said their clients felt more positive about their investment performance than they did six months ago.

Increased Confidence
According to the Fidelity Millionaire Outlook survey of 1,011 “financial decision makers in U.S. households with investable assets of at least $1 million” taken in October, millionaires expressed increased confidence in their outlook for the economy compared to the previous year, and 43 percent said they plan to invest more in the stock market over the next twelve months.

Those findings match what Luminous Capital is seeing among its ultra-high-net worth clients, according to Alan Zafran, partner and co-founder of the firm, who believes the findings are still valid.

“The ultra-high-net worth have benefitted from the recovery,” Zafran said, who is based in Menlo Park, Ca. “Their equity exposure has gone up and they’re seeing from their own business or their friends’ businesses that things are improving.”

Despite the recent bad news from abroad, Zafran said he’s seen no signs of change or panic from his clients. “I think the scope of the evidence leads one to believe that things are moving in the right direction,” he says, “despite numerous dislocations that are taking place outside the United States.”

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