Brokers Prepare Clients for Low Quarterly Reports

By ANNIE GASPARRO

Brokers are scrambling to prepare their clients for low third-quarter account statements expected to hit clients' doorsteps in the next week.

The average brokerage client with exposure to equities will be facing asset losses of around 15% to 25%, analysts and brokers said. Many brokers are being proactive in calling their clients to warn them, and those who aren't could face the consequences.

"You're going to lose a handful of clients regardless, but you have to warn them or it's going to be a lot worse," said a broker and branch manager at Merrill Lynch & Co. He is having a strategy meeting with the brokers at his office to prep them on warning clients of their third-quarter results.

While clients can almost always view their balance online, many less-active investors don't look at it until they get the paper copy in the mail, said Scott Smith, analyst with the Boston consultancy, Cerulli Associates.

Mr. Smith estimated that it is probably 50-50 among advisers as to how many are calling their clients. "You can't hide from it. So what can you do but reach out to these clients and hold their hands?" he said.

A branch manager at Stifel Nicolaus said staying in touch with clients is the most important thing a broker can do in such volatile times. "The brokers can't control the market, but they can control how they handle what's happening in the market," the manager said.

Brokers who don't warn their clients ahead of time can expect to have their clients hounded by brokers at competing firms.

Mr. Smith said, "If brokers aren't calling their clients, they're just asking for it. Trying to react to screaming or even crying clients isn't fun." He said it's much easier to be proactive.

It is even more vital for brokers to get in touch with clients if the firm is doing nothing to keep clients in the loop, said Mike Ellison, co-founder of Corporate Insight, a research firm covering the financial services industry.

Corporate Insight found that only 40 out of 101 brokerage firms surveyed had addressed the credit crisis with their clients as of last week. Only six firms sent letters describing their exposure, and just three offered video messages from their chief executives explaining the situation. "Even if your firm is safe, you need to be telling clients that, or else they are going to assume something is wrong. Transparency is the key," Mr. Ellison said.