Week in Review

Building a Lasting Client-Advisor Relationship

Valentine’s Day is around the corner, and celebrations will look extremely different this year. Instead of a romantic getaway, you may be taking a virtual vacation! Instead of going to a favorite restaurant, you’re making dinner at home or ordering takeout to share with the kids. In any relationship, flexibility and understanding are essential when you encounter new situations, and the pandemic has reinforced the importance of working with those you trust most.

Professional financial advice is important for one’s financial future, and advisor selection – like a life partner – is just as important, because you typically invest in the person for the long-haul. Defining goals, understanding your economic situation, and hiring a financial advisor that you trust will allow you to stay committed to your investment processes, and can make a stark difference in portfolio returns and objectives. This latter point is especially true when there’s increased market volatility, as we’ve seen throughout the pandemic, specifically in March of last year.

Fear can be a big deterrent as clients watch volatile price swings diminish their savings and investments. An old adage and one conveyed by many of the world’s most renowned investors is, “Time in the market beats timing the market.” Fear and panic-selling and/or buying can change the course of one’s long-term financial well-being. Recent fads like the masses joining the ‘Reddit Revolution’ also pose issues for long-term objectives, where in typical short squeeze fashion, GameStop among other securities like AMC saw vicious price swings that were profitable for some, while others wanting a piece of the action, suffered dearly. During times of extreme volatility and uncertainty, investors should stay the course. They also need to be reassured and communicated to, that everything they’ve worked so hard for will be okay. Advisors should be in their clients’ corner to explain complex issues, which is why communication is crucial to every lasting long-term relationship.

Communication

Constant flow of communication in any relationship is necessary, particularly when it involves finances. In marriage, and dating, and any relationship, large purchases should typically be discussed. I wouldn’t bring home a new car any more than my wife would without discussing the matter, and in the same respect, clients expect purchases aka trades to be in line with their objectives and/or some discussion to take place prior to a large purchase and/or new investment. When the pandemic first hit and stay-at-home orders were given, some advisors entered dark mode and weren’t communicating with their clients. Fear set in, and whether advisor or client-driven, fear-based investing can be one’s worst enemy. No matter how the market is performing, advisors must have open and transparent communication to reassure their clients, and that what’s happening in the market now, is unlikely to alter their long-term goals if you stay the course.

Be Accessible and Proactive

It’s said that absence makes the heart grow fonder. That sentiment was certainly tested in 2020! Because of the advancements in technology – particularly in the Fintech space – there’s little excuse for clients to have to go weeks or months without talking to their advisor. Like dating, it’s okay to make the first move. We all have insecurities and want reassurances from our significant others. The same holds true to the relationship investors have with their advisors, and advisors need to be proactive for their clients; they have to understand what keeps their clients up at night and tailor communications to make sure clients feel comfortable and protected, especially as the desire for an urgent response was accelerated during the pandemic. Even though there was no safe way to meet with clients at the beginning of the pandemic when market volatility and fears were at all-time highs, we still had the ability to communicate via text message, phone and video calls. Many client fears and insecurities can be alleviated, when advisors are preemptive.

This proactive approach extends beyond communication and can even be applied to investment management. Prime Capital Investment Advisors strives to take an active approach to investment management so we can be proactive in positioning portfolios appropriately, rather than simply being reactive due to market volatility, or simply incorporating a buy and ignore approach, also referred to as set-it-and-forget-it. Like our personal relationships, we want to know our partner is thinking about us and taking appropriate measures to protect our well-being, rather than merely acting when something is wrong, or not giving the relationship the effort it deserves.

Trust

I mentioned it in my blog post from February of 2020, and I’m mentioning it again here. “The bedrock of any relationship is trust. The same premise should be applied to investments because clients entrust their capital to investment professionals in the same way we entrust our hearts to loved ones. Many advisors study and work hard to perfect their craft, and while schooling and certifications do wonders in teaching practical application, it is a combination of real-life, on-the-job-experience combined with practical knowledge that allows us to make optimal decisions and build trust. As an investment manager, I have to trust my analysis and thesis and remove bias and emotion from the decision-making process. But advisors are still human, and while removing emotion is easy in theory, it is often harder to practice, especially when the market is acting irrational and selling off for unexplainable reasons. Conviction to our process and trust in our analysis is necessary to avoid giving into emotions, overreacting, and panic selling. Like personal relationships, cool heads prevail. Take a step back, relax, and ask yourself, what has changed?”

Trust is key. In the short term, there are a variety of things that can happen in life, causing investors to second-guess their long-term saving strategies and goals. In the end, if a solid relationship is forged with transparent communication, the client and advisor work as a team, continuing to monitor financial positions as compared to the overall goals, everything should work out as planned.

 

Securities offered through Private Client Services, Member FINRA/SIPC. Advisory services offered through Prime Capital Investment Advisors, LLC. (“PCIA”), a Registered Investment Adviser. PCIA: 6201 College Blvd., 7th Floor, Overland Park, KS 66211. PCIA doing business as Qualified Plan Advisors (“QPA”) and Prime Capital Wealth Management (“PCWM”). PCIA and Private Client Services are not affiliated.

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