Balancing the Emotion-Risk Equation

Investment Advisor, Mike Wilson, CIM, FCSI, lays out his proven strategy for supporting retirees in the face of a crisis.

What I learned from 2007

Crises are challenging by nature, but they give Advisors a valuable opportunity to prove their mettle. Starting out on my own in 2007 was perhaps the biggest test and the best education I could have had to face this pandemic.

Looking back, however, the most critical lesson I learned from the financial crisis was the emphasis on risk – and more importantly, how it differs in good times and bad. Across my client base, there were clear inclinations to use emotion, versus a long-term strategy, to navigate portfolios. Seeing some of the same trends today, my approach is to drive home the need for risk control, in a way that it allows my clients to sleep at night even when the going gets tough.

Addressing anxiety

I often say that clients pay us to take the stress out of their situation. The pandemic has ushered in an unprecedented level of anxiety, which more often than not, is brought on by both financial and health concerns. In my exchanges with retirees, I find that the most efficient approach is hearing them out and inquiring into their state of wellbeing. On the flipside, they also benefit from the time we invest into education and raising awareness.

On a broader level, we send out regular monthly updates to address concerns, and in lieu of face-to-face meetings, make sure we’re accessible 24/7 by phone or email.

Ultimately, we deliver impact by making sure that each client’s risk profile is in tune with their asset allocation. In fact, in the current environment, we’ve had many interactions where the primary concern is whether the financial plans are still relevant and accurate. As a reminder of what’s fundamental, we circle back to our conservative approach with their retirement, which continue to deliver target returns.

In fact, as far as investment planning goes, we make sure that we don’t go beyond the bounds of our strategy, which is to invest in a global economy that’s improving, and quality companies that respond to that universal growth.

A nuanced approach to retirement planning

Currently, the vast majority of my clients fall in the 55 to 60-years-and-older range, putting retirement planning at the forefront of our conversations. In most cases, they come from industries and jobs without a pension plan, which puts a greater onus on creating a long-term income source, protecting portfolios and offsetting market drawdowns.

The strategy to replace income really comes down to risk control. Twenty years ago, stock picking was considered the best way to achieve this outcome – banking on companies that had the best growth potential. Today, the role of an Advisor has evolved significantly into that of a quarterback, who builds the offense, with a team of specialists, that can address a client’s unique needs.

At MR Wilson and Associates, we offer access to high-net-worth retirement planners, tax strategists and other consultants who can develop customized game plans for varying requirements. For example, a large portion of my book is comprised of small business owners who may be looking to sell their stake before retirement. We start a detailed planning process at least two years in advance if possible, to make sure the client gets the most out of the deal.

Bucking common advice

As I launched my own practice, the most common advice was to find a niche. In my opinion, Advisors looking to build an organic client base should consider every opportunity but create a network of experts for every specialization. It took years of trial and error to perfect my process, but in the end, it helped to find opportunities that were a good fit for me.

Another tip is to leverage every aspect of your situation to identify new clients. In Alberta, where it’s typical to find retirees from the oil & gas sector, it’s critical to track the industry, which in fact has seen an uptick of early, or sometimes forced, retirement for three to four years now – well before the current crisis started.

Personally, I still have avenues to explore. As an avid scuba-diver, I have met high-net-worth individuals who could become long-term clients. In other words, it helps to transition a hobby or common interest from being a talking point to a source of referrals or new business.

Finally, surround yourself with a team of able professionals who can supplement and amplify your goals. I’ve been fortunate to work with a business partner, who’s not just a colleague but a friend and willing to challenge my thinking to ensure we have covered additional potential risks. Moreover, we’ve added new capabilities to our practice, including hiring an associate with his own set of clients. He is fluent in Mandarin, which opens up a new pipeline of opportunity, and another level of service.

Overall, the clincher in any Advisor’s journey is their ability to realize their worth. When you’re starting out, it is hard to understand why a client would work with you rather than trade using an online platform. Over time, you begin to make a difference when you use your experience, knowledge and decision-making prowess to filter the large swaths of information that bombard them constantly. Without doubt, addressing the specific needs of your clients, and cutting out the noise – particularly at a time like this – is where you add the most value.

For more ideas to enhance your practice, or learn more about BMO Retirement Portfolios, contact your BMO Global Asset Management Regional Sales Representative.