Volatile Markets? How and When to Communicate With Clients

Jun 8, 2021 Share This 


Volatile_MarketsFinancial advisors generally understand and accept that volatility is inherent in the stock market, but not all clients are as immune to the natural ebb and flow of investing.  Market dips may grip clients with fear, leading to a reactive leap out of their long-term investment strategy.

In “panic mode,” having a big picture discussion about the economy or market cycles may briefly calm clients. It likely won’t take long, however, until they once again worry themselves into considering poor financial choices.

As their financial advisor, part of the value you bring to the advisor/client relationship is a voice of reason to combat the fear. Acknowledging your clients’ concerns as valid has a twofold benefit. It reinforces that you take your clients seriously and that, by wanting to help, you are on their side. From there, leaning into a conversation about the situation and next steps may prove easier and more advantageous.

What to Communicate

There are several key pieces of information that all clients — and particularly nervous ones — generally need to hear from their advisors when confronted with volatile markets:

  • Market volatility is customary. Explain that market ups-and-downs are typically routine and anticipated. In the grand scope of history, volatility isn’t particularly out of the norm.
  • Market drops aren’t necessarily equivalent to personal losses. While the S&P 500 may dip, the impact on client portfolios won’t necessarily keep pace with index percentages. If you’ve guided your clients toward a diversified portfolio, it may decline with the market, but to a lesser degree. Looking at historical markets may also help reassure clients by showing how they’ve typically bounced back and, in fact, returned to higher levels than before major declines.
  • Don’t try to time the market. Clients may be inclined to sell during a downturn. Discourage the “get out of the market” thinking by reminding clients that accurately predicting when to leave during a decline is no guarantee of that same good timing when returning to the market. Guessing wrong could mean incurring losses.
  • Focus on the long-term. Reassure your clients that the financial strategy you’ve worked together to build and follow takes short-term volatility into account. Staying the course even when corrections cause some apprehension is typically the smart decision.

When to Communicate

Passively waiting for nervous clients to reach out to you during a financial crisis may only drive fear and panicked investment decisions. Instead, help them prepare for the impact of a volatile market by proactively debunking market rumors, misleading headlines or other anxiety-inducing stories. A well-timed email, phone call or virtual visit could head off clients who are prone to fear-based conclusions and decision making.

Market volatility may make some clients feel particularly vulnerable to loss and fearful of staying in the market. That’s why it’s important to arm them with the facts and help keep them grounded. For clients who are approaching retirement and remain cautious about traditional investing, a conversation about the growth potential of annuities may be appropriate. Of course, there are some annuity myths that may need to be debunked as part of that conversation, too.

To help, we’ve outlined many of those annuity misperceptions in our online guide, Debunking the Top 6 Myths About Annuities. Use it as a conversation starter to help empower your clients by protecting equity exposure and feeling confident about their long-term financial strategies. Click the button below to access this valuable guide now.

Bebunking Annuity Myths


Topics: Client Relationships