Calming clients' fears is advisors' No. 1 goal

I'm a "coastal elite." My clients are "coastal elites" and "international elites." Most of us did not vote for Donald Trump last week, and none of us expected that he would actually win. I believe that Trump probably didn't think he'd win.

For me, Election Day afternoon progressed from comfortable certainty about Hillary Clinton's chances, to concern around dinnertime, to disbelief by 11 p.m., to shock and horror by midnight.

I went to bed at 2 a.m., woke up at 4 a.m. and arrived at my office by 6 a.m. to address what I knew would be a cascade of distraught phone calls and emails from my clients.

A costumed reveller wearing a mask depicting Munch's famous painting 'The Scream' poses near St Mark's square during the carnival on February 21, 2014 in Venice.
Gabriel Bouys | AFP | Getty Images

Here were some comments:

  • "David, if you can call earlier than 8 a.m. tomorrow, please do so. Need to discuss liquidating first thing in the morning."
  • "In the event my holdings are still worth a few coins, I'd like to touch base with you."
  • "Please sell everything now. I'd rather miss further upside now than risk selling after an event that points to the long-term disaster that this administration could turn out to be."

In times of stress — for example, after the Sept. 11, 2001, attacks and after the failure of Lehman Brothers — one of the most important things a financial advisor can do is get out in front of the clients with information. To that point, advisors need to convey a plan. Here's what we know; here's what we don't know; here's what we're trying to figure out.

For example, the team at my advisory firm had a bulletin out to our clients within 30 minutes of the Boston Marathon bombing a few years ago. We were proactive this time around, as well. Our commentary "Confounding All Expectations, Donald J. Trump Elected U.S. President" hit our clients' inboxes by 8 a.m. on November 9.

More from FA Playbook:
6 ways Trump will affect your wallet
Potential market impact of a Trump White House
How Trump's tax plans might affect your return

We then began returning clients' phone calls.

Though we expected the markets to fall by 5 percent, perhaps even as much as 10 percent at the open, our counsel was: "There's no point in selling into this morning's decline. Ultimately, the stock market only cares about corporate revenues and earnings and interest rates. Just because we received bad news today doesn't mean that McDonald's stops flipping burgers, Pfizer stops researching medicine, Boeing stops building aircraft. Corporations will adapt to the unexpected new environment because that's what managers are paid to do."

Our clients responded to our commentary. Here are some examples:

  • "There go the paintings, silver and furniture. Thanks for the note. Feel somewhat better."
  • "Well stated, David. A great perspective. I hope all is well."
  • "Thank you, David. I needed your perspective today. Hugs, H."
  • "THANK YOU FOR THIS!!!!! It is one of the few things that have made me feel better (at least for me, if not the country)."
  • "Hi David, thanks for the comments, very interesting. You can tell others that one of your clients says 'the market goes up and down. The best strategy seems to be to buy companies which have value and where managers have a longer term view of their job. Good luck!' And BTW, I am also among the devastated!"
  • "Buy into the hysteria! — Dave, wherever possible, please take advantage of this buying opportunity."
"Our early morning commentary and rapid return of phone calls enabled us to calm clients to the point where we could make good decisions on their behalf."

Unexpectedly, stocks rallied for two days straight.

For every disappointed investor among the 60,467,245 Americans who voted for Clinton, there was an exhilarated investor among the 60,071,650 Americans who voted for Trump. There was another factor: For the last two months, U.S. stocks traded in a 1 percent to 2 percent range while investors waited for Election Day. Post-election, sidelined cash suddenly came back into stocks.

Certainly, there is reason for concern over the next few years. Trump's proposed tax cuts, implemented without adjustment, would cause the national debt to soar 75 percent in four years. To implement such cuts, Trump has to earn the votes of debt crusaders like Paul Ryan, so it's not a foregone conclusion.

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As we often tell clients, "It's always something."

For the moment, we talked most of our clients out of precipitous selling and satisfied one by raising $100,000 in cash. Over the next several months, we'll see how Trump's transition team proceeds, get a sense of the Republican legislative agenda in 2017 and then, only after preparing an informed strategy, will we start selling and buying among our companies.

Our early morning commentary and rapid return of phone calls enabled us to calm clients to the point where we could make good decisions on their behalf. Any advisor who can't do this for his or her clients shouldn't be in the business.

— By David Edwards, founder/president of Heron Financial Group