May 12, 2020 - AdvisorHub publisher and CEO, Tony Sirianni, asked top advisors from leading firms their opinions on the dual management of the Coronavirus pandemic and market crises. Read how these advisors are managing one of the most unique challenges we have faced as a financial community.
Here is how Walker Hays, Managing Director, B. Riley Wealth Management, responded.
How are your clients reacting to the dual threat of COVID-19 and the market crash? What are you telling them?
Reactions vary depending on the client. People respond differently based on how they're affected. We have clients that are on lockdown and terrified, while others are frustrated and eager to get back to work. Many of our clients are providing essential services and are going to the office every day, while others, such as doctors and dentists, are shut down due to the inability to perform elective services, and they have had to lay off employees or burn through savings.
In terms of the market, I tell them "this, too, shall pass." Putting a valuation on the market is impossible, but I remind them that when things are down by 35 percent it's not a time to sell; now is a chance to rebalance your asset allocation.
What about your business? Are you "maintaining" or are you growing?
While we are focused on maintaining and checking in on people, we've experienced some growth because people are seeking help; some because their financial advisor failed them, and others for a different reason. Word of mouth has driven growth for our practice, as our current clients have received inquiries and thus, my team is getting those referrals.
We have added some individual accounts, and although taking over a 401(k) account is a longer process, we're still having conversations with prospective clients. Right now, clients are not changing vendors in such a volatile market because they run the risk of missing "up days" where they can potentially regain losses. There is too much risk right now in being out of the market, even for two or three days, during such an unpredictable time.
Is there an opportunity to build your book because other brokers are afraid to pick up the phone right now?
Prior to the "shelter in place" orders, we were in the process of starting 401(k) plans for several companies, but after the COIVID-19 shutdown most of them decided to wait until there is a clearer picture of the post-crisis business landscape. It is unfortunate, but with so much uncertainty it makes sense for them to delay things a little before adopting additional employee benefits.
On the private client side of our practice, there are people who really need help now and, as such, new clients have come our way. People always have a need for good financial advice, and inquiries from people who need our services, have received an inheritance, or are struggling to manage their portfolio themselves have come our way during the past several weeks.
How do you prospect without traditional client interactions during a market climate like this?
Under these conditions when you cannot meet prospects face to face, it can be tough to prospect, but those who need assistance are asking for it.
Where do you see opportunity in the market? Are you recommending any investments right now to clients, or suggesting they exit certain investments or sectors?
The market declined and then recovered so quickly that there was such a small window to react. Yet, at the same time, there are obvious market segments to avoid. Opportunity lies somewhere between buying into technology providers while avoiding sectors (or companies) dependent on the reopening of the country, such as movie theater chains. We use third-party managers, so I rely on them to make those calls.
One recommendation I give that is constant, however, is the advice I share with my new clients, be they 401 (k) participants or regular investors. I apprise them that the market will go through major corrections or recessions multiple times during their lifetimes. For younger clients, a major market dislocation like the one we are having now always trends upward eventually, and that is opportunity knocking; thus it is an ideal time to buy.
That said, the decisions they make must depend on age and risk tolerance. I cite myself as an example and tell clients that during the 2008 financial crisis, my 401(k) lost about 45 percent of its value. Eventually it came back, but it took years to recoup those losses. Everything I bought while the market was down, however, doubled or tripled in value. Of course, older clients may not have the benefit of time and that must be reflected in their asset allocation.
Do you have any sense of where to invest post crisis?
Right now, with the markets so unpredictable, I'm riding out the storm and just making adjustments, but not selling.
Post-crisis, there will likely be opportunities with companies that lost ground but will bounce back. Certain things will never be the same, but companies do evolve, and as an advisor my job is to try and help clients find those opportunities.
What's been the most useful piece of technology or business practice that you have discovered or you will use in your business going forward?
Regardless of technology, in times of crisis and extreme volatility, frequent communication is key. Clients you have not communicated with in six months need to talk to you, and as an advisor you must make yourself available. Our clients participated in a lot of our videoconferences, which was helpful for us and them. One thing I would also add is to make sure you have a comfortable chair in your home office in the event that we face another crisis in the future.
How are you handling the challenge of working remotely and managing clients? Is video conferencing effective?
I am working longer hours, but it is all from home, and that has certainly been an adjustment. I feel as if I spend my weekends in the office, too. While it's been nice to have more time with family, I'm generally shut in my home office from 7:30 A.M. to 5:00 P.M. or later every day, so when I see my kids during working hours, it is because they are walking by my office and waving because they know I'm occupied with clients.
My team and I specialize in 401(k) plans and private client wealth management, so with the CARES Act comes many questions. We have been making and fielding a tremendous amount of client calls, so we can be accessible for our clients in any way we can.
Videoconferencing has been quite effective for us; we have held plan sponsor calls and large-scale Zoom meetings so participants and clients can attend and have their questions answered. People want to know that you care about them whether you're talking to them about personal issues or their accounts, and we think it is important to "see" one another. I'm constantly in touch with my team members, and we make sure we have a team call once a day in addition to communicating with each other regularly. We divide and conquer by reaching out to clients and then circling back with one another to keep everyone in the loop.
We are constantly speaking to company owners and participants, giving them guidance on how to invest. We will allow potential clients to listen in on some of our calls if they are unhappy with their current 401(k) plans and are considering a change. We want them to know how we interact with our participants at other companies so they can see how we may be able to help them (and their plan participants) in such an ambiguous climate.
What will you take with you post COVID-19 to help you grow your business and deepen your client relationships?
From a personal standpoint, I've lost a pastor to the virus and I have clients (and their family members) who have been diagnosed with the virus who will hopefully recover. Another, however, lost a parent to COVID-19. I think everyone knows someone affected by this, and that's the toughest part. Moving forward, I'm focused on how precious time with family and friends are. I do worry about my father and others who seem to be the most vulnerable.
From a market standpoint, this is largely "same song second verse" from the 2000 dot com and 2008 crises. It will always be something different that causes market volatility, and there is no way to predict what the future holds. Being there for our clients during this crisis has deepened our relationships and led to new business.