The Coronavirus: How to Talk with Clients About Its Market Impact

Mar 13, 2020 Share This 

Coronavirus_market_impactFears over the Coronavirus (COVID-19) and its rising death toll have resulted in significant market volatility in recent weeks. The market rallied, only to fall again, then up, then…you get the idea.1 When the Federal Reserve issued an emergency rate cut in an effort to ease investor concerns, stocks experienced sharp gains yet again, only to quickly fall.2

Perhaps you’ve already fielded numerous phone calls and messages from clients who are nervous about the status of their retirement portfolios. Some may have even suggested pulling funds in an effort to “stop the bleeding.” News stories about market swings are fueling fears among investors, but few provide practical guidance for those who anxiously watch from the sidelines, wondering whether their retirement plans are in jeopardy. 

When talking with concerned clients, it’s important to help them keep their long-term goals top-of-mind, offer thoughtful perspectives, and provide reasoned advice that aligns with their values.

Remember the Past

It’s been more than a decade since the financial collapse that brought on The Great Recession. For some investors, it’s a distant memory. How easily we forget that, despite its recent ups and downs, the market index is still more than double what it was back then.3 Those who reacted in fear and chose to exit the market at the time may now regret that decision, even in the midst of the current volatility.

Bringing up some of the circumstances that led to the market collapse in 2008-2009 may be helpful. While there are certainly no guarantees that today’s markets won’t plunge to new lows, the economic climate of a decade ago is very different than today’s, as the subprime mortgage crisis that led up to it was simmering for years.

When clients call in a panic, it may be helpful to share hard data showing market growth in the past 10 years and how their portfolio, in particular, may have experienced gains since then. Doing so may help them see that slow and steady wins the race.

Understand the Now

Science shows that the human brain is naturally wired to respond irrationally when someone feels highly stressed or fearful.4 Some individuals are better at navigating these stressful times than others and have learned how to recognize and question these tendencies. 

It may be helpful to encourage clients who are more worrisome to simply pause and reflect on their goals and personal values. What brought them into your office originally? What strategies did you discuss? How did they respond when you asked them about their risk tolerance? And how has their portfolio been structured to address those risks and their personal comfort level?

Reminding clients about their expressed goals and the process of achieving them may bring clarity and help them make thoughtful, rational decisions that align with their values.

During this time, highly risk-averse clients may appreciate your recommendations to help them minimize losses moving forward. When instability rears its head during rough markets, Zone and Horizon annuities with set floors help clients ride out volatility and may help you shine as their advisor. They’re another tool in your diversification arsenal that allows clients to stay invested in the market without sacrificing their peace of mind and experiencing the roller coaster of emotions that go hand-in-hand with the ups and downs of the market.

Look to the Future

As you’ve worked together with your clients to build long-term strategies that align with their values, it likely accounted for different life scenarios, some of which may have been difficult to consider. These may have crossed spectrums and ranged from spending more time with grandchildren, to paying for long-term care or addressing longevity risks. Help them recall that, in addition to addressing these types of potential future life events, their strategy also likely accounted for a scenario that involved the kinds of short-term market volatility we’ve experienced recently. 

While some clients may be anxious in the moment and want to cut their losses while they can, reminding them of their long-term vision for the future and how you’ve worked together to craft that strategy may help quell fears. While they certainly can’t turn a blind eye to current events, staying the course even when market volatility causes apprehension may be the wisest decision.

Communicating with clients during volatile markets is critical to building trust and reassuring them of the path they’re on. Your voice of reason may be just what they need to hear. Being proactive can help you gauge where they’re at and determine potential next steps. If a client is experiencing undue panic, a conversation about their strategy and whether it still aligns with their values and goals may be appropriate. 

For highly risk-averse investors, annuities with risk control may be a consideration. Those that offer downside protection while allowing upside potential may be a welcome addition to their portfolios. We’ve gathered additional ideas to help you address investor fears in a helpful guide, How Investors Can Take Control of Market Volatility. Access the guide below and use it to help guide clients toward a confident future.

How Investors Can Take Control of Market Volatility

Sources:

1CNBC.com. Coronavirus facts allowed Wall Street to rally Monday, Jim Cramer says, March 2, 2020
2CNBC.com, US coronavirus death toll rises to 9, mortality rate of COVID-19 rises, March 3, 2020
3Marketwatch, DJIA Dow Jones Industrial Average (INDEX), March 4, 2020
4Think2Perform, Inc., The Behavior Gap

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Topics: Client Relationships, News & Press, Risk Control