Getting Client Calls After A Stock Market Shift? Here’s How To Reassure Them
The stock market is known for its ups and downs, but when a major shift happens, many investors go into panic mode. As a financial advisor, you’ve likely received frantic calls from your clients during these times: Are their investments safe? Do they need to make changes to their portfolios? What does this mean for their financial future?
When worried clients come to you for guidance and reassurance, it’s important to be aware of what they might not understand and assuage their concerns to keep them confident in the services you’re providing. Below, members of Forbes Finance Council share what they tell anxious clients to reassure them following a big stock market move.
1. Volatility, Corrections And Bears Are Natural Market Processes
Clients should refer to a comprehensive financial plan, anchored to the standard deviation or potential volatility of the agreed-upon portfolio allocation. Clients need help understanding how portfolios expand and contract, yet also assure them that the portfolio volatility (which can be very different than market volatility), should not jeopardize the attainment of long-term financial goals. – Richard Rosso, Clarity Financial LLC
2. Portfolios Are Built To Anticipate, Not React To, Volatility
For years we have coached our clients that portfolios are built in anticipation of volatility, not in reaction to it. On the rare occasion that a client needs some reassurance, we revisit their written Investment Policy Statement with them and show them how many years of their upcoming spending needs are sitting in low-risk investments we call their “stability bucket.” – Erik Christman, Oxford Financial Partners
3. There’s A Process In Place To Address Fluctuations
We have designed your plan with a long-term perspective, but also with a short- and medium-term process to address market fluctuations. Our approach includes effectively utilizing our gain benchmarks when they occur so you can take advantage of an opportunity, as well as keeping you focused on the long view when disturbances occur in the market so we avoid rash decisions. – Scott Karstens, NFG Brokerage
4. Reassess Your Appetite For Risk
Downturns are a natural part of the market cycle. Investors who get elated during a bull market and panic when there’s a dip may end up making snap decisions based on emotion, rather than taking a long-term view. I advise nervous clients not to panic and to reassess their appetite for risk. As people age, this may decrease significantly. A less aggressive strategy may better suit their needs. – Ismael Wrixen, FE International
5. Review Your Financial Plan To Ensure You’re On Track To Reach Your Goals
Volatile times can be a “gut check” in terms of your portfolio allocation, investment strategy and financial plan. Never make portfolio changes based on fear and greed. Rather, use this time to review your financial and retirement plan to see if a change in your portfolio would help assure that you reach your goals. Your financial goals need to be your benchmark, not beating the S&P 500. – Scott Bishop, STA Wealth Management
6. Look At Gains And Losses Over Time
My advice is never to have any knee-jerk reactions. Volatility is part of what investors have to bear with the stock market. I judge gains/losses for any particular investment over a two- to four-year period. This way when things move abruptly (and they will), you can look to the past history, coupled with any sociopolitical and financial factors that caused the movement, to make the right choices. – Jared Weitz, United Capital Source Inc.
7. Follow A Regular Schedule Of Reallocations
Your portfolio strategy should not be based on market moves. My recommendation is to always diversify your portfolio and decide on what percentage is allocated to each fund or asset class. Reallocations should be done on a regular time interval, such as monthly or quarterly, and not be based on market moves. Additionally, for long-term strategies, set a one-month limit between decision and execution. – Vlad Rusz, Vlad Corp. USA
8. Invest In Businesses, Not The Stock Market
The best course of action for our long-term investors is to commit their investment capital not to “the market” but to well-run businesses positioned for future growth. Our entire investment discipline has always been based upon this conviction, and it has served us well through not just the 2008 to 2009 panics but through previous recessions, going back in fact to the one-day panic of 1987. – Gerry Frigon, Taylor Frigon Capital Management LLC
9. As An Advisor, Get Ahead Of The Curve
We take a proactive approach at our company. We don’t wait for our clients to call us. We reach out to them through quarterly portfolio meetings, our newsletters and our education portals on YouTube, Instagram and LinkedIn. Clients lose confidence when you are reactive. So we choose to always take a proactive approach, hoping that we never need to be reactive. – Justin Goodbread, Heritage Investors