The prospects of a recession are ever-present. With the political divide in this country, the possibility of this animosity impacting the financial markets is always a strong possibility. Any shocks to the system can quickly drive the markets lower. When markets fall, the advisory business as a whole suffers. With fewer acts to manage, fees along with profitability drop.
While this is the case for the advisory industry, adverse economic conditions provide an opportunity for some advisors. Severe or prolonged down markets can enable forward-thinking advisors to grow their businesses exponentially.
While many investment advisors benefit from investor inertia, if their portfolios are seriously hit, they will usually consider replacing their advisors. For advisors to benefit, they must be at most one degree away from disgruntled investors. It would also be beneficial if the intermediary is considered a valid source of expertise. Most often, these intermediaries are accountants and attorneys.
In times of market reverses, the clients of accountants and attorneys will often talk to these professionals and ask about investment advisors they would recommend. Remember, the catalyst for these conversations is poor investment results. When such requests are made, and the accountants and attorneys can provide not only a name but also a solid well-structured introduction, assets tend to move and move quickly delivered. Investment advisors must also have impactful narratives about themselves and their abilities.
Powerful narratives encompass a lot more than investment philosophies and approaches. They succinctly communicate the way each professional works with clients and how they think about the expertise they deliver. The narratives recognize the market reversals and provide a clear bespoke way for investors to align their objectives with what is currently happening.
To benefit from a market meltdown, investment advisors must establish meaningful relationships with accountants and attorneys well before a market meltdown. Trying to build the requisite level of rapport as the financial markets crater will not happen. Moreover, the nature of these relationships is always beneficial for all involved. The investors absolutely must benefit. The investment advisors benefit by getting new investor clients. But, very significantly, the referring accountant or lawyer must also benefit; and that means more than taking good care of their clients.
The most effective way to do this is not by referring clients to accountants and attorneys. As an approach to business development, this does not work particularly well. There are other means to help accountants and attorneys excel. Going these routes proves to be a more reliable way to be the investment advisor of choice when their clients are unhappy with their investment performance.
Without question, if the markets melt, most investors will suffer. Investment advisors with substantial relationships with other professionals like accountants and attorneys will be able to grow their practices significantly.
Russ Alan Prince is the executive director of Private Wealth magazine and chief content officer for High-Net-Worth Genius. He consults with family offices, the wealthy, fast-tracking entrepreneurs and select professionals.