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Delivering bad news

Practice Management

How to Deliver Bad News to a Client

Kristan Wojnar, RCC™ Mar 19, 2019


It certainly isn’t a fun part of the job, but delivering bad news to clients is inevitable as a financial advisor.

So how do you broach potentially touchy territory with clients triumphantly when both market highs and lows are part of the investing journey?


Be Direct and Honest


While you don’t have to sound the alarms for every slight decrease in your clients’ portfolios, when it is time to deliver unpleasant news, it is important to be as direct as possible and to not beat around the bush.

Honesty trumps everything and full transparency is key. Remember to use language that is both clear and concise. Try your best to summarize the “bad news” you need to deliver in one to two sentences. In other words, don’t be overly verbose and do not create unnecessary build up to the delivery.

No matter how you slice it, delivering bad performance news affects your clients’ financial lives, so it is never easy to be the messenger.

However, keep your emotions at bay as much as possible. If you remain steady and calm, chances are high your client will follow your lead. On the flip side, if you display emotion or angst, they will also likely follow your lead and may panic.

A note of caution, don’t mistake keeping emotions at bay for not being compassionate or respectful. Be sure to demonstrate empathy if their reaction is to become emotional. Offer them ample time to ask questions and allow them to share with you how they might be feeling.


Stay Neutral and Keep It Simple


Going hand in hand with keeping your emotions in check, it is crucial to stay neutral in your delivery. Do not become defensive and always lead with just the facts.

While some bad news can be addressed in an email or letter, such as a team member leaving the firm, most of the time the news is delivered in a live client meeting or on the phone.

Whether you are having a face-to-face meeting or a phone call, be as prepared as possible with all of the facts and information prior to the scheduled meeting. Your goal is to ensure your client understands exactly what happened. You will need to be prepared to offer a comprehensive explanation on how this news impacts their long-term financial plan.

The good news is that this is an ideal time to reiterate and explain your overall investment philosophy. Emphasize the importance of the big picture and the focus on the long term. Provide them handouts of any charts, visuals or calculations that may be helpful to them. Sometimes the third-party validation is helpful in explaining.

Be proactive and ready to offer them a solution on how they will recover from this news. Reassure your clients with an outline of what the game plan will be to move forward from what occurred.


Be Timely


Be sure to deliver the negative news in a timely fashion. There is absolutely no reason to delay delivery. Waiting unnecessarily long or stalling to deliver the news is never a good idea.

Especially in the case of bad news being related to market volatility, the news could potentially get worse before it gets better.


Avoid Humor, Stay Positive


As tempting as it may be to try to soften the blow with humor, try to avoid it. Also avoid sarcasm and jokes. The delivery of humor doesn’t always work well with every client and it really isn’t worth the risk.

Jokes always have the potential to go over like a lead balloon. Humor can also easily be misconstrued, so it really is best not to attempt it.

While you should steer clear of humor, an optimistic outlook should definitely be present. After the delivery of the negative news, shift to optimism.

Be sure to change the overall tone of the meeting to something positive. Always refocus and end the conversation on a positive note.


Follow Up


Always follow up after the bad news has been delivered and promise to keep your clients informed. Be sure to update your clients when any new facts or information become available.

Assure them that you are available to answer any additional questions that may come up.

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The Bottom Line


When negative news is delivered poorly, it can make receiving the bad news even worse. It can also tarnish client trust or prompt the client to leave you. This can be avoided if you are proactive before a potential crisis hits.

Planning for how to deliver bad news is key. Remember to lead with honesty, educate your clients and manage expectations as much as possible from the onset of your relationship. This way when bad news does emerge along the investing journey, the delivery will not be as difficult.

Be sure to check out Dividend.com’s News section for next week’s Market Wrap and other great dividend investing news.

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