The Wise Way to Handle Panicky Clients in such Times and Even get Referrals

Amar Pandit , CFA , CFP

Amar Pandit

A respected entrepreneur with 25+ years of Experience, Amar Pandit is the Founder of several companies that are making a Happy difference in the lives of people. He is currently the Founder of Happyness Factory, a world-class online investment & goal-based financial planning platform through which he aims to help every Indian family save and invest wisely. He is very passionate about spreading financial literacy and is the author of 4 bestselling books (+ 2 more to release in 2020), 8 Sketch Books, Board Game and 700 + columns.

Ajay Kothari, a retiree in his late sixties called up his financial advisor Rahul (Real story with names changed). Though Ajay was coached by his financial advisor to expect very sharp corrections and they had seen it together before, this time it seemed different. Ajay was normally very calm and composed but something inside him had triggered a reaction. He was extremely worried about his portfolio and in general the well-being of his family & friends. He was panicking to the extent of moving everything into cash.

I am sure you would have come across similar scenarios like this or of a different variety where some clients want to stop SIPs or redeem their portfolios because of the perceived safety of cash…However, one very funny thing happened (which I have never seen at least in my life ). Rahul got a call from Atul, a client who never wanted to invest and used to keep money in Bank Accounts or Fixed Deposits. This time the call was to invest in the market. When Rahul asked why he wanted to invest now, Atul said “The Banks are no longer Safe, and I want to diversify investing in Mutual Funds”.

So, what’s really happening in both these cases?

Ajay and Atul are worried and thus their Amygdala (the centre for emotions, and emotional behaviour in our brains) is super active. Their Amygdala is telling them to Run to Safety…Some more context on what I am trying to say.

You should read the book “Thinking Fast and Slow” (by Daniel Kahneman- known as the father of Behavioural Finance), an excellent book that basically tells us that we have 2 Systems of Thinking.

System 1 is the first responder and operates automatically (Like if you saw a Tiger…No time to think right). It’s called the Reflexive system and its role is to act on feelings. System 2 is our Thinking Brain also known as the Reflective one. This is where you think about the future, plan and exercise self–control. However, when clients come to you, their System 1 is at work…

The key job then is to ensure that you get their System 1 to Rest and Activate their System 2. Unless you are able to activate System 2, all charts that you show, or ask clients to think long term or do all kinds of analysis will actually go waste.

Thus, you must never ever start these meetings or calls with data, analysis, or trying to prove you are intelligent. Your clients are looking at you to play a leadership role in their lives and helping them navigate these times.

Thus, the first thing that you must do is to acknowledge their thoughts (so that they feel heard), empathize with them by actively & genuinely listening to their concerns.

What are they really trying to say?

Ask them some questions (you can come up with your own as well) and let them speak.

  1. What is actually bothering you?
  2. Are you concerned about any impact on your lifestyle or monthly cash-flows?
  3. Are you worried about the market decline? Is this causing sleepless nights?
  4. Are there any other things that you would like to talk about?

Once they feel like they have been heard and you have actually been hearing their concerns, you would have figured out what’s actually bothering them.

In Ajay’s case, one of his friends in the club was bragging about how smart he was to come out of the market, how the world was going to be doomed and why Ajay needed to do it.

Rahul had understood his concern and reassured Ajay calmly with the following:

  1. He showed Ajay that no matter what happens, how Ajay will be getting a steady income for the next 4 years irrespective of the market levels.
  2. He told Ajay of the proactive rebalancing strategy that he had already initiated where he would come out of debt (Sell High) and move in a staggered way into Equity (Buy Low).
  3. Rahul was able to even demonstrate that how Ajay would be able to leave a substantial legacy for his children and grandchildren even if the markets were to fall by another 20%.

Once Rahul was sure that Ajay’s System 2 was at work, he went on further to substantiate his points about how markets have performed in the past globally after such steep falls, and why moving out of Equity can create undesirable consequences such as inability to come back again in time (seriously hurting his wealth).

At this point of time, Ajay was not just calm and composed but also wanted to invest additional amounts into Equity (which Rahul said to invest in a staggered way). In short, Ajay felt safe and comfortable. Ajay even told Rahul that he would be introducing him to his friends from the club.

You can also make this offer to your clients “I will be happy to speak with your friends and family members, who might be concerned and might or might not have someone guiding them professionally. I would be happy to guide them like I have been guiding many people.”

Your real value is not shown in bull markets, but in tough times like these! Advising people on their money is not easy and competent advisors feel multiple times the levels of stress as they feel responsible for their client’s investments and financial life. India needs many solid and real professionals like you and it’s time to play a leadership role in the lives of many people.


P.S. Since every client and the financial situations are different, the conversation will have to be modified accordingly. However, the spirit of the conversation is covered. I am happy to help you if you need more clarification or guidance through such conversations.