When Wealthy Clients Get Skittish
This week, the business of financial advising seemed to take the first steps toward reviving itself as Morgan Stanley and Citigroup unveiled a joint venture of their brokerage operations. Those who work for the newly constituted firm - or BofA/Merrill Lynch, or any other firm helping individuals manage their money - should be prepared: Your clients are skittish, and they may decide to work with a portfolio of advisers to manager their portfolio of assets.
That's the theory of Dan Ariely, a professor of behavioral economics at Duke University and author of the book Predictably Irrational. The alleged shenanigans of Bernard Madoff, he says, have "proved to be incredibly devastating to their trust."
Others say wealthy clients may decide to forego advisers completely. "Instead of a healthy skepticism of markets and advisers, what develops is a paranoid or delusional mistrust. And that leads to a Depression-era mentality of putting money in a bank or under the mattress," Dr. Kenneth Mueller, a psychiatrist in New York, tells InvestmentNews.
What to do? Advisers and others consulted by InvestmentNews suggested:
- Be transparent, accessible and honest
- Be prepared: You're going to be challenged by wealthy clients
- Be patient: Remember your clients are anxious, and even depressed
Finally, the newspaper says financial managers are moving away from the idea of selling "exclusivity" when marketing their services. Instead, they're talking about close relationships and focusing on fundamentals, like capital preservation and understanding risk.