If the markets sold off 40% what happens to your advisory business? Your client’s assets are devalued. Market losses are the topic of discussion of the day. Business grinds to a halt. No one wants to open up a new account.
Anyone running a business in tough times looks to contain if not reduce expenses. Should advisory firms pare back their compliance programs and expenses? Regulatory compliance is probably one area that should an area of focus in tough market times but not to cut expenses!
After years of a bull market clients have been lulled into thinking that the markets just go up. Sure maybe a 10% pull back every now and then but never a wash out. Ironic isn’t it. Being in the business a while helps you to remember historical events, not that you can necessarily avoid them or prevent them. Do the years 1987, 2000, 2008 mean anything to you?
Market sell offs may be the time when clients begin to review and scrutinize their custodial account statements. When they see unrealized losses they might want to blame that on you. Get out in front of this. Increase you client contact with personal calls and newsletters. Remind your clients of the investment strategy in place with their accounts.
If business slows up take some time for client file reviews to ensure all trading has matched the client’s investment policy statement and risk profile. Client suitability on trading and investment strategies is a frequent attorney accusation thrown at advisers. In the event of customer complaints know your firm’s policies and procedures. State regulatory agencies are over whelmed with client complaints associated with market wash outs. Consider having that compliance mock audit to get a second pair of eyes on your business practices before it is the regulator’s eyes.
Lexington Compliance and RIA in a Box LLC are not law firms, investment advisory firms, or CPA firms. Lexington Compliance and RIA in a Box LLC do not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.