Keeping investors invested

Past cycles 'paint a picture of not just full recovery but exponential growth just by staying invested'

Keeping investors invested
Colin Andrews, senior wealth advisor, senior portfolio manager, and business leader for The CM Group at CIBC Wood Gundy.

The roller coaster ride of the last few years has had a massive emotional impact on clients, and in difficult times the ultimate goal — to help investors stay invested — can be an even greater challenge than usual. So what’s an advisor to do?

“Markets are complex, but my thoughts are the same as they’ve always been,” says Colin Andrews, senior wealth advisor, senior portfolio manager, and business leader for The CM Group at CIBC Wood Gundy. “Too many people try to make too many changes based on what’s happening today and this is an error. You’re not smarter than the market.”

Since 2009 the CM Group has been invested in index-like products and counsel clients not to try to outthink what sectors or asset classes will be best, but to be broadly diversified. Focus on things you can control, like asset allocation and asset location — from a tax perspective, which assets should be in which types of accounts? — and determining how much risk is really the right amount.

When mired in tough market conditions, although it’s true the nature of the market is cyclical, it’s not particularly helpful to simply tell clients that’s the way it is so just stay invested. Andrews gets far better results with a two-pronged approach that manages clients on a behavioral basis: be empathetic, listen to their fears and stress, and ensure they know it’s OK to feel that way, and then refocus them on the fact that the market has been here before. Point back to the global financial crisis, for example, and how markets were down 50% in 2008-2009 and compare that to today.

“When you see markets go down 30% it would be abnormal to not feel stress and fear, but paint a picture of not just full recovery but exponential growth just by staying invested,” Andrews says, noting the firm has the benefit of long-term clients they’ve worked with for a decade or two in many cases. “Normalize their emotions but also acknowledge the impact if they make a drastic change right now. We advise clients to stay invested and we rebalance portfolios on a quarterly basis — that’s how we do it.”

An advisor’s role requires patience when dealing with clients and market cycles, but equally if not more importantly, it also requires humility. Especially in down markets, clients look to you to know everything and it’s OK to say you don’t know what’s going to happen because there’s no way to know. While you do have your own beliefs and expertise to share, ultimately “we need to position people’s portfolios so they’re set up for the worst case scenarios, those what-if scenarios, along with the good times,” Andrews notes.

And that goes for managing clients in both states as well. The CM Group’s service strategy includes regular phone communication and email blasts, setting out talking points, and hosting regular webinars (though Andrews is optimistic there will be a return to more face-to-face presentations this year and beyond). The COVID-19 pandemic may have changed dramatically the delivery of client communication, but it didn’t change the cadence of it. From continued quarterly wealth management reviews, albeit digitally, the drive to make sure clients stay on track is stronger than ever and the bottom line is regular communication.

“We’ve sent out a number of letters over the last year to clients just acknowledging what’s happening – why are interest rates going up, why is inflation high, what does it mean for the stock and bond markets, how does it impact their portfolio — and we’ve received a lot of great feedback from that,” Andrews says. “We are very proactive with that outreach.”

Looking forward to 2023 and beyond, Andrews says he’s a big believer in continuous improvement exercises. An error many groups make is building a service strategy once and thinking they’ve hit the bar, but as the industry has experienced first-hand over the last few years — and as the cyclical nature of the market illustrates time and time again historically — building anything once doesn’t work because things change: creating something once doesn’t mean it will be right forever.

The CM Group is always trying to streamline processes and has various committees who oversee different parts of the business and report back to the team as to any improvement opportunities or projects that should be top-of-mind. Much like his overarching market outlook, Andrews’ 2023 outlook is more of the same: continue to improve processes and maintain a high level of proactivity with clients.

“We believe by doing that we’ll gather market share without ever asking for it, to be quite frank,” Andrews says. “We just want to do good work for people and let them know what we’re doing.”