‘It’s not the percentage on the paper, it’s what it represents’

Advisors should lean on softer skills of financial planning to prove value to clients

‘It’s not the percentage on the paper, it’s what it represents’
Shannon Lee Simmons, financial planner, author, and founder of the New School of Finance

Declaring 2023 one of the trickiest years the industry has faced in a long time — pandemic aside — Shannon Lee Simmons encourages wealth professionals to lean on the softer skills of financial planning to navigate through the economic uncertainty.

Making a habit of reaching out proactively when there’s a big economic event or announcement —another interest rate hike, for example — is a great way to let clients know you’re there for them, but for the day-to-day approach in an environment like this, “the challenge is how best to communicate with clients on how to stay the course of their plan and not make panic-based decisions.”

Simmons is already fielding a lot of questions from clients about inflation, interest rates, and market volatility, but she recommends taking a step back and engaging instead in discussions around their life plan and how to balance their different goals. At the end of the day, if someone says they’re upset about stock returns what they’re really saying is they can’t retire as soon, and they’re scared and sad; or they’re disappointed because they were planning to buy a house in 10 years and now they feel they can’t do that; or the interest rates are rising so now they can’t renovate or their children’s education funds are taking a hit.

“They’re not actually worried about a percentage on a piece of paper, but what it represents,” Simmons, financial planner, author, and founder of the New School of Finance, says. “If an advisor can name what they’re anxious about versus keeping it just about performance, that’s a way of cutting through the noise and getting to heart of the matter. When people feel heard, understood, and you’re helping make a plan around the core issue, it’s a great way to connect with your client that isn’t just defending a position in an asset mix.”

Simmons also recommends a laser-focus on client timelines. You don’t want someone with a wishy-washy time horizon to all of a sudden need their money in one or two years when it’s been a volatile period, so push for that information to ensure they’re properly invested — or not invested, given what’s going on in their financial lives. And be sure to look at all clients with a fresh lens, because a long-term investor three years ago may not be one today, so it’s a best practice to do an update with everyone.

Clients find out their true risk tolerance in a down market, Simmons adds, and education around volatility is critical. With prospective clients, prioritize going over historical returns — not to prove how much money can be made, but to really illustrate for them the volatility that exists and to normalize it so it’s not so scary when another dip occurs. This is a solid strategy given the inherent ups and downs, and Simmons laughs that it may seem her recent launch of her newest book, No-Regret Decisions: Making Good Choices During Difficult Times, was made with the current uncertainty in mind, but that book deal was actually signed in 2019 — even before the COVID-19 pandemic. The premise of the book is that there will always be difficult times in people’s lives that impact our finances, whether the economy is flying or quite the opposite. Whether it’s divorce, critical illness, or job loss, major financial decisions often need to be made in times of great stress.

“It’s a playbook for anybody, advisor or client, to walk through how to make decisions when things are tricky and financial and emotional stakes are high,” Simmons says, adding it’s fortuitous it’s come out at a time when many are grappling with big choices on a day-to-day level.

Above all, Simmons urges her fellow wealth professionals to not lose sight of the fact that the challenge of stewarding clients through this period is also 2023’s biggest opportunity. In bull markets, people often feel they could do it all themselves with the information and technology that’s available, but during the difficult times planners and advisors have the chance to say, this is why we’re here.

“There’s a lot of value around the emotional connections and offering empathy along with financial plan-based advice and proper goal setting to help navigate a tricky time is when we matter the most,” Simmons says. “That’s an opportunity for all of us.”