Communication with Clients on the Rise

In Russell Investment’s latest quarterly survey of U.S. financial advisers, the Financial Professional Outlook (FPO), advisers were asked what they plan to tell clients in preparation for next year. Forty percent of the comments focused on expectations for continued volatility, followed by slow economic growth (15% of comments).

Sixty-three percent of advisers say that market volatility has been a primary topic of client-initiated conversations over the past three months. Perhaps for this reason, 78% of advisers report increased outbound communications (phone calls) with clients. More than half (52%) are having more client meetings and 49% say they are receiving more inbound calls from clients as well.

The quarterly FPO also asks advisers about their sentiment and what they think their clients’ sentiment is for the capital markets broadly over the next three years. Overall, 66% of advisers report being optimistic about the capital markets, down from 72% in the September 2011 iteration of the survey. With respect to their clients’ perspective, only 9% of advisers feel that clients are optimistic about the capital markets, which reflects a continued decrease over the course of the past year.   

Despite expectations of continued volatility and decreased optimism regarding the markets, 34% of advisers’ comments reflect a desire to grow their business as the top priority for 2012. Another 20% of advisers’ comments center on enhancing their client focus and 19% indicate their priority will be increasing or improving client communication.

“Advisers know that volatility and the continued uncertainty surrounding issues around the globe are battering investors’ views on the markets. Communication is key for allaying clients’ fears but it also presents some challenges−most notably, advisers must decide carefully how to manage their time effectively,” said Ryan Parker, managing director, national accounts and business development for Russell’s U.S. adviser-sold business.

Forty-four percent of advisers indicated that portfolio performance has been a primary topic of conversation initiated by clients in the past three months–a notable increase from earlier surveys (32% in September 2011, 26% in June 2011). Over the same time period, advisers say they are bringing up portfolio performance themselves less often; only 30% say it is a common topic they are initiating in client conversations, compared to 42% in June 2011.

Advisers and investors appear to be on the same page when it comes to conversations about global events, with 44% of advisers saying this is a topic commonly initiated by both clients and themselves. In September 2011, only 23% of advisers indicated they were initiating discussions with clients on global events, compared with 37% who said clients were doing so. In spite of this recent increase, only 31% of advisers say they plan to make global events a major focus of conversation with clients in the first quarter of 2012.

Despite the increased focus on performance amongst investors, most advisers surveyed are making minor changes, if any, to clients’ portfolios. Overall, 61% of advisers say that where it makes sense they are making some small, tactical changes to portfolios for those clients with relatively short investment time horizons and 48 %say they are doing the same for those clients with relatively long investment time horizons. For these investors with longer horizons, 43 %of advisers say they are not making any changes at all and instead urging clients to stay the course.

“Advisers are clearly realizing that with the continued prominence of global issues, their clients are worried and they need to address these concerns head on. Yet where clients may be fixated on the outcomes of such events, advisers must help investors maintain focus on long-term goals and the elements that can be controlled, rather than daily headlines,” said Parker.

To help their clients understand the implications of ongoing market volatility, the majority of advisers surveyed indicate that they rely on tools provided by their broker/dealer home office (23%), mutual fund companies (20%) or other external sources (17%). However, a significant portion (40%) says they rely on their own analysis and commentary to help clients think about market volatility.

“Advisers certainly have a role to play in helping clients make sense of what is happening in the markets, but there is an opportunity cost to spending time doing the analysis themselves,” said Parker. “We find that the most successful advisers are those who spend the majority of their time engaging clients directly and the more time they spend on back-end research, the less time they have for interaction. Advisers aiming to grow their businesses might benefit from seeking external resources to help with this research so that they can focus on guiding their clients to develop and maintain a plan to most effectively pursue their financial goals.”

Russell collected the opinions of more than 300 financial advisers working in 132 national, regional and independent advisory firms nationwide.  More information about the FPO, including a video and a full report of findings, can be found at: www.russell.com/Helping-Advisers/YourBusiness/FinancialProfessionalOutlook.asp.  For last quarter’s results, see “Most Valuable Service is Helping to Maintain Perspective.”