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Clients are not only nervous about their health during the coronavirus pandemic, but also their portfolios. Shlomo Benartzi, professor of the Behavioral Decision-Making Group at the UCLA Anderson School of Management, recently gave a webinar that looked at how to handle panicked clients. Part of the presentation broke down into six steps how to deal with high-risk clients — those who are highly loss averse and are more likely to sell in times of market volatility. He recommended these actions:
1. Call high-risk clients first.
Benartzi admitted that his advisor hadn't yet called him, and perhaps it's because he wasn't a panicky client. However, he saw that in 2008-2009, too often "advisors were afraid to call their clients," and that is wrong as well.
2. Become an "app doctor."
Help clients create an informational environment that is healthier. Many people check the market multiple times a day through phone apps, but they shouldn't, "especially those who are well funded and have a long horizon," he said.
3. Reframe the discussion.
"But given the environment, it's hard to prevent people from looking. So frame discussions around opportunities to buy." He said he's not advocating market timing, but an advisor will have to rebalance a portfolio. Therefore, when the market goes down, an advisor can explain that they are buying stocks cheap. "Bring to life to the client on how we take opportunities to buy and sell," he said. "It changes the discussion to 'this is how much you lost' to 'this is the great [discounted stock] you'll benefit from.'" Framing makes a huge difference, he said.
