Dealing with very emotional clients

Ethics rules require advisors to demonstrate availability, prudence and diligence with respect to their clients and potential clients. In times of crisis, the CSF recommends being even more proactive and contacting clients immediately.

That’s exactly what Manon Bisson, an investment advisor at Industrial Alliance Securities Inc., did. When the crisis hit, she started calling every one of her 150 clients. “Each call took between 20 minutes and an hour,” said Ms. Bisson. “I’ve called the most anxious clients more than once. This is normal. They pay me to be there for them when things aren’t going well.”

Maud Salomon, a mutual fund dealer representative and financial security advisor at MICA, a financial services firm, also increased contact with clients—by phone, email, videoconference or social media. “One aspect of our role in this kind of situation is to explain information,” said Ms. Salomon. “People hear and read a lot of things. So we need to explain the facts well and put them into perspective.”

Ms. Salomon also uses charts and images to support certain points: to show why it’s better to stay invested in the long-term or to explain bad reactions by investors. “But clients mustn’t feel that we’re asking them to make sense of a chart themselves,” she warned. “Advisors’ explanations must be clear.”

Dealing with panic

When she called all her clients, Manon Bisson found that some were panicking. A woman in her sixties sold all her investments. A recently retired client did the same. He cashed in all his units in a balanced mutual fund, against her advice, and said he could go back into the market when things were better. But share prices may have increased by then.

“This is the mistake not to make, but it’s the client’s decision,” said Ms. Bisson. The Chambre also specifies that advisors have a responsibility to provide clients with all the necessary information on the pros and cons of such a decision, ensure they understand and make an appropriate recommendation. If, despite all this, the client still wants to sell all their investments, the final decision rests with them. By documenting in the client’s file all the warnings given to them, your recommendation, as well as the client’s decision not to follow it and their signature on this document, you will be able to show that you have acted professionally.

Hadi Ajab, an independent financial planner, came across similar cases. A 71-year-old lady suddenly wanted to sell everything and switch to the money market,” said Mr. Ajab. “Her risk profile is low and her investments have been allocated accordingly, so only a small part is exposed to the stock market. I had to talk to her a lot, explaining that it was a bad decision.” For the time being, she is following his advice, but he knows they will talk about it again.

Talking to advisors, it’s quite clear that older people are more alarmed by the situation. “Anxious clients who have called me are usually three years or less away from retirement,” observed financial planner Armine Chbani.

That’s why the CSF recently published a post specifically about this type of clientele.

Tempering enthusiasm

While some clients are in the grip of panic, others are tempted to do the opposite and take advantage of good buying opportunities. François Doyon, a financial security advisor working for Planium inc., has seen this among his clients.

Mr. Doyon believes this attitude can also lead to risky transactions. It’s difficult to know if the markets have hit bottom or if they will continue to fall. What’s more, the crisis is first and foremost a health crisis, not a financial one. Assessing the short-, medium- and long-term impacts isn’t easy. “Sometimes our role is to temper the enthusiasm of our bolder clients,” said Mr. Doyon. “I advise them to come back into the market gradually, by investing once a week, for example.”

In a context where emotions have a greater influence on decision-making, the advisor’s role is crucial. Section 5 of the Regulation respecting the rules of ethics in the securities sector states that “a representative shall caution a client who gives him an unsolicited order which does not appear to be in keeping with his situation.” Advisors must take detailed notes of conversations and have the facts at hand to explain the reasoning behind the recommendations. It’s even more important when a client rejects them and makes a different decision.

When a client wants to make a decision contrary to her suggestions, Manon Bisson sends them a letter outlining her recommendations. She asks the client to sign it and send it back. She only makes the transactions afterwards.

Most importantly, advisors must know how to reassure their clients. What does Maud Salomon tell them? “Take care of your families first, the market will recover in due course.”

Refer to the CSF’s InfoCOVID-19 section for more information