The Value of Communicating with Clients During Volatile Markets

Nov 6, 2018 Share This 

Market_VolatilityFinancial 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.1 It’s not uncommon for a market dip to grip clients with fear, and often a reactive leap out of their long-term investment strategy follows.2

In “panic mode,” having a big picture discussion about the economy or market cycles may briefly calm clients but it likely won’t take long until they’ve again worried themselves into considering bad financial choices.3

As their financial advisor, you must supply a voice of reason in order to combat fear. Acknowledging your clients’ concerns as valid has a twofold benefit. It reinforces that you take your clients seriously, and that you are on their side in wanting to help them.1 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 all clients — and particularly nervous ones — need to hear from their advisor when confronted with volatile markets:

  • Market volatility is customary. Explain that market ups-and-downs are routine and anticipated. There is nothing particularly out of the norm for this specific market cycle.4
  • Market drops aren’t necessarily equivalent to personal losses. While the S&P 500 may have dipped, the impact on client portfolios doesn’t keep pace with index percentages since accounts aren’t invested in the index. Portfolios may decline with the market, but usually to a lesser degree. Likewise, a down market hasn’t historically stayed down forever. Market bounce-backs usually occur before significant personal losses are realized.4
  • 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.4
  • Focus on the long-term. Reassure your clients that the financial strategy you’ve worked together to build and follow accounts for short-term volatility. Staying the course even when corrections cause some apprehension is the smart decision.4

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 webinar from you could head off clients’ jumping to fear-based conclusions and decision making.5

Market volatility may make some clients feel particularly vulnerable to loss and fearful of staying in the market. With regular communication and the advice found in Inside Risk Control: Managing Market Volatility, you can empower them to protect equity exposure and feel confident about their long-term financial strategies using the MEMBERS® Horizon variable annuity. Click the button below to access this valuable guide now.

Risk Control: Managing Market Volatility Fact Sheet

SOURCES:

1Investment News, Advisers should make the most of volatility for clients, March 29, 2018

2Investopedia, Financial Markets: When Fear & Greed Take Over, February 21, 2018

3Financial Planning, ‘What happens when the market acts normally again?’, February 5, 2018

4Indigo Marketing Agency, How to Communicate With Your Clients About Market Volatility, February 6, 2018

5Advisor News, Use These Tips to Guide Wary Investors Through Market Volatility, September 7, 2017

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Topics: Risk Control