Wealth management advisers counsel clients on remaining calm

For wealth management advisers, in good times and in bad, it's not just a matter of keeping track of their clients' money.

A good deal of their job is managing emotions.

“I think the biggest job we have is to manage the emotions of the client and remind them we want to maintain a disciplined approach to the plan we created. This becomes especially important in times of increased volatility,” said Chris Graw, a wealth management adviser at Northwestern Mutual in Hiawatha.

“Oftentimes when managing one's own money, people can become emotional and make unwise decisions based upon that emotion. Doctors don't operate on themselves - everyone needs a trusted partner to help them stay the course.”

“People often make irrational decisions when driven entirely by emotion,” agreed Kevin Bruns, senior vice president of wealth management at Cedar Rapids Bank and Trust in Cedar Rapids. “Many individuals reacted (to the market) emotionally and as a result have far less wealth than they once did.

“We've had people come to us after knee-jerk reactions. They realize they are good at making money but not as good at retaining it. We can take emotion out of it, step back and provide perspective.

“In many situations, an adviser can bring a voice of calm, reasoned objectivity to the situation.”

It's probably not surprising that there is a lot of aversion to risk in today's market, Bruns said.

“People are more fearful and more likely to question long-held assumptions and beliefs,” he said. “There is an aversion to equity markets in general because for 10 years have seen flat returns.”

This is especially true of investors who came into the work force 15 years ago. He added the fluctuating market and other economic conditions - the ongoing financial troubles in Europe, for example - make clients uneasy.

“They have felt safe to sit on the sidelines rather than play that capital. And when we do get good economic news, they are reluctant to believe it,” he said.

One trend is making their financial plans more conservative, particularly in rate-of-return assumptions, Graw said.

“We work hard to educate clients, helping them to separate their short-term dollar needs from their long-term goals,” Graw said.

CUSTOMER RETENTION

But with such commoditized products, attracting and retaining customers has to stay top of mind.

“We typically attract our best clients through referrals from our current clients,” said Graw, who has been working in the business for 10 years.

Bruns, a 22-year veteran of the profession, said they most often work with high-net-worth individuals - people with a family income of $150,000 plus or investable, liquid assets of $500,000 and up. The approach to recruiting customers is two-pronged:

“Internally we look to work with people already doing business with us. They have been clients of the bank and have a high level of trust,” Bruns said. “Externally we are looking in the target market within the same geographic region the bank serves.”

And wealth management is a huge focus for financial institutions these days, he added.

“In these times where the demand for loans is not great, high-end, fee-based relationships generate income. Plus these relationships tend to be long-term,” he noted.

“I've seen statistics that these clients are with you at least 10 to 14 years or more. There's a great deal of longevity, and it's a great revenue stream from the bank's perspective.”

Bruns and Graw agreed that while many clients may have a solid understanding of investments, working with a trusted wealth management professional offers other benefits, especially in times of economic uncertainty.

“Most of our clients are very successful because they are great at something else,” Bruns said. “Some could be very successful money managers, but their time is best spent in their chosen profession. We do this full time and we have an interest and passion for it.”

That “passion” might be harder for clients to find in a few years. Financial advisers themselves are aging, Bruns said.

“With the aging boomer population, the demand is great, but the number of people to deliver this service is shrinking. The market conditions don't facilitate new people getting into wealth management.”