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Being Right Is Different from Getting It Right

January 5, 2018

This time we hear from Dana Brewer, principal financial advisor at Edina, Minn.-based Birchwood Financial Partners. She tells the story of how losing a client taught her to be a more sympathetic and collaborative advisor.

In 2008, when the recession hit, I immediately started doing all I could to reassure clients and encourage them to stay the course. Our firm sent out emails and made phone calls left and right. We reassured our clients that these sorts of downturns were to be expected and reminded them we’d worked hard to build diversified portfolios that could withstand market fluctuations. We used data, illustrated by charts and graphs, to show them how much they stood to gain by waiting out this difficult period.

Most clients took our advice to heart. A few were tempted to get out of the market but we were able to talk them off the ledge. One client, though, was resistant to our appeals. This man had been working with us for a couple of years. He was nearing the end of his career and he was worried he and his wife wouldn’t recover in time to afford the retirement he’d imagined.

I worked hard to convince him to hold steady. I talked to him three times on the phone and sent him at least as many emails. I argued that even if equities were taking a hit, bonds would hold their own. I cited studies I thought definitively showed that staying in the market was the wise decision. I could hear the anxiety in his voice when we spoke but he was an engineer and clearly a smart guy, and I thought that by appealing to data and logic I’d be able to prove my point.

It didn't work. The client wasn’t convinced by my arguments and he ended up pulling his money and ending his relationship with our firm.

Afterward I thought about where I went wrong. I wondered if I’d been too clinical in my approach. I’d been so sure my arguments were sound and I believed my clients would feel reassured by my confidence. But perhaps there had been a downside to that certainty. Perhaps it had kept me from interacting with my client more sympathetically.

Since then, whenever I talk to clients I try to do a better job of listening between the words. Even when I’m sure I know the best answer I try to offer solutions to clients that meet them halfway. If I had a chance to do it over with the client who left me I might suggest he cash out some of his money and then buy back into the market a little at a time, at a pace that felt comfortable to him.

Dana Brewer

We’ve tried a number of tools at our firm that were designed to quantify how our clients would behave in down markets but over the years we’ve come to see that their results aren’t accurate. It’s impossible to model extreme situations in a way that takes emotions into account. If a client has experienced a market downturn in the past, she might have an idea of how she’ll react to a future downturn. But in general clients don’t know how they feel until they feel it. We have to be receptive to their emotions in the moment.

My colleagues and I talk about the “sleep at night factor.” We need to make sure our clients are able to make decisions that will allow them to sleep at night. Our role isn’t to make them conform to what we think is best for them. It’s to show them the potential consequences of their choices and work with them to create solutions in a way that feels good for both of us. That requires confidence on our part — but it also requires that we are humble enough to really hear our clients, too.