April 1st, 2020 · 4 min read
This time on the Pulse: Advisor/client communication strategies for troubled times; JPMorgan trading desks succumb to a glitch; and an IRA expert urges advisors to scrutinize the dates for 2019 IRA contributions, now due by July 15.
Before we turn to the news, let’s consider the value of avoiding panic — this time with insight from two leaders in their respective fields. We’ll share their ideas shortly.
Helping Clients Cope with Crisis When There’s No End in Sight
With a young bear devouring portfolios, financial advisors are getting inundated with calls from worried clients.
Before Covid-19 started dominating deadlines a few weeks ago, most advisor/client conversations were about the coming US presidential election and how much more room the market had to grow after 11 years of expansion. That’s what Wells Fargo market strategist Scott Wren tells the Financial Times.
But now, clients want to know where the “bottom” is, and how bad the coming recession will be, Wren says.
To sharpen advisor communication in these troubled times, wealth-firm consultant Beverly Flaxington shares five important points to consider when reaching out to clients.
“No news is not good news in times of crisis” because it “stokes fears, and lets clients think you have something
to hide,” Flaxington writes. Instead, “create a communication campaign to let clients know, step-by-step, what you are thinking and doing.
Customize your messaging.
Design client-specific communication plans for those who are vulnerable to Covid-19, very important to your business, or tough to deal with in the best of times. “Allocate time to call certain clients directly and talk through your strategy for their portfolios
and the next steps you will take,” Flaxington urges. “Know who these clients are — and get to them before they get to you.”
Allow for emotional responses.
“You can reiterate this is a long-game and not to focus on the daily bruising, but affirm the natural fear and concern an investor has during this time,” says Flaxington.
Run “what-if” scenarios with your team.
You do with your clients’ portfolios, start doing it for your business. Examine potential outcomes,
good or bad. What if the firm loses a certain percentage of clients? Can junior staffers take on more responsibility? Have competitors foundered in the crisis? “It can be inspiring and confidence-building to your team to think about the possibilities and their
reactions to them,” writes Flaxington.
Don’t tell anyone to calm down.
Instead, work to instill confidence in clients and colleagues alike with a calm demeanor.
Tech Snafu Silences JPMorgan Trading Desks in Tense Session
Two trading-platform meltdowns on the same day recently left JPMorgan Chase’s biggest clients high and dry, according to Bloomberg News.
On Thursday, March 19, in the middle of a particularly tense session in reaction to the coronavirus crisis, JPMorgan's wealth-management trading platform seized up. As a result, information on trades couldn’t be shared with account holders.
Afew hours later, JPMorgan’s electronic platform — mainly used by institutional clients such as hedge funds — also sputtered out with similar symptoms and results.
Both platforms were still down when the session ended.
In an after-hours note to staff that day, JPMorgan said the systems were back up. The culprit, according to the bank, was unusually high trading volume that led to a “prolonged delay” in getting confirmations to clients, reports Bloomberg.
JPMorgan pledged in the same memo to consider compensating clients who lost out in the confusion, according to Crypto Vibes, a financial-news website.
In addition to high volumes, JPMorgan pointed to an infrastructure snafu linked to a patch it had recently added. Ironically, this “fix” was meant to help the bank’s trading desks cope with panic selling linked to the public-health crisis.
With IRA Contributions Extended, FAs Urged to Double Check Paperwork
In response to the public-health crisis, the IRS has bumped the deadline for income-tax filings and payments back to July 15, taking the deadline for making 2019 contributions to IRAs along for the ride.
Typically, IRA-contributions must be made by April 15, even if the filer asks for an extension.
The reprieve makes solid sense to IRA-distribution expert Ed Slott.
“Many people make prior-year IRA contributions at the last minute, even in normal times,” Slott writes as a guest columnist for InvestmentNews. “Given the current dire circumstances, it might be tough to get those checks into IRAs if advisers’ offices are either
closed or working with skeleton crews.”
But Slott sees the possibility of a widespread administrative snafu around these late filings. He urges financial advisors to make sure their clients’ paperwork for IRA contributions filed after April 15 but before July 15 is earmarked for the tax year 2019.
The problem, writes Slott, is that “some financial institutions may have systems in place to code any IRA contribution made after April 15, 2020, as a 2020 IRA contribution.”
As a remedy, Slott recommends vigilance — and the simple expedient of making sure clients include a memo on their checks making it clear they are funding IRA contributions for 2019.
“Panic causes tunnel vision,” says author and speaker Simon Sinek. “Calm acceptance of danger allows us to more easily assess the situation and see the options.” That’s certainly helpful in terms of personal motivation.
Fortunately, we also have late NBA great Kobe Bryant to help us grasp the negative effect on teams of a leader’s agitation. “If I panic, everyone else panics,” he once said.