Serving the high-anxiety client

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Serving the high-anxiety client

Nov 12, 2013 @ 8:59 am (Updated 9:02 am) EST

Stress and anxiety are at all-time highs among investors in the United States, which can make it difficult to work with clients who are overwhelmed by lurching from crisis to crisis. There are some things advisers can do to help stressed-out clients though, such as focusing on the big picture, said John Diehl, senior vice president of the Hartford Funds.

“The most important first step in building a jigsaw puzzle is to look at the picture on the box,” Mr. Diehl said Monday at the Schwab Impact Conference in Washington D.C. “Once you know what the picture looks like you can start putting the pieces together. The criticism is our industry puts the pieces together before the client sees the final picture.”

That’s particularly important for clients anxious about saving enough for retirement.

“People under stress and anxiety suffer massive amount of risk aversion, blinding them to opportunities in the market,” Mr. Diehl said.

“People are still living in 2008,” he said. “They remember what it felt like. The fact that they may have recovered doesn’t dismiss the emotional connection they felt when they saw their portfolios losing 20% or 30%.”

Clients who are stressed also tend to seek out negative news, but advisers can use that to help clients by focusing on the good news when a client comes to them.

“When your client comes in, wanting to talk about the prospect of muni bonds, they’ve already read everything about Detroit, Harrisburg and Puerto Rico,” Mr. Diehl said. “But they haven’t seen any counterpoints. Focus on the positive and have some third-party resources to back you up.”

Advisers should be mindful of staying on abreast of the stresses in a client’s life to help them manage difficulties. It’s something that’s becoming more expected of advisers. Simply managing a portfolio no longer cuts it, Mr. Diehl said.

“Clients don’t expect you to be an expert in everything, but they expect you to be a connector,” he said.

For example, Mr. Diehl suggests advisers should get to know the person who runs the memory care facility at the local nursing home. If a client has a parent dealing with Alzheimer’s disease, the adviser can connect the two.

Ambiguity, whether it’s around an investment product or the future, is a big cause for stress, so the better an adviser knows a client, the better service he or she can give.

“Know where your clients were educated, where they recreate, congregate and donate,” Mr. Diehl said. “Then you’ll know what motivates.”