Volatile Markets? How and When to Communicate with Clients

Written by: Marshall Heitzman, CFP®, ChFC, FLMI, CPCU, BFA™

Sep 20, 2022 Share This 

5.24 Client Communication Volatile Markets

Financial advisors generally understand volatility is inherent in the stock market, but the last few years have been putting every long standing assumption to the test. Between the pandemic, unemployment and financial stress, supply chain issues, the invasion of Ukraine and an entire laundry list of worldwide crises, it’s an understatement to say the markets have been on a rollercoaster.

Even in less globally stressful times, not all clients are as immune as advisors to the ebb and flow of investing. Market dips occurring during more typical times may grip clients with fear, leading to a reactive leap out of their long-term investment strategies. Now, with all that’s been happening more recently, that fear may be amplified and lead clients to make rash decisions.

When they’re in “panic mode,” a big-picture discussion about the economy or market cycles may briefly calm some clients. But they may benefit from guidance beyond that initial conversation, to help them keep the panic storm at bay.

An important part of the value you bring to the advisor/client relationship is your voice of reason to combat the fear. Acknowledging the validity of your clients’ concerns during a volatile market has a twofold benefit: It reinforces the notion that you take your clients seriously and it demonstrates that, by wanting to help, you are on their side.

What to Communicate When Markets are Bumpy

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

  • Market volatility is customary. Sudden declines and rises in the stock market are normal.1 Explain to your clients that, in the grand scope, volatility itself isn’t out of the ordinary. This kind of talk can tame the scary unknown for them into something much less frightening and easier to handle.
  • Don’t focus solely on timing the market. Market timing can be employed as an investing strategy in numerous ways.2 But many considerations need to be made regarding the entire long-term strategy. 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. You can even use this as an opportunity to examine rebalancing the portfolio to see if your clients are prepared for the long haul, including considerations of this kind of volatility.3

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, try to temper that anxiety and help them prepare for the impact of a volatile market by proactively debunking market rumors, misleading headlines or other worrisome stories.

Pay attention to the news and see if there could be something concerning to your clients that poses an opportunity to check in. A well-timed email, phone call or virtual visit could head off clients who are prone to fear-based conclusions and decision making.

Prepare Your Clients for Volatility

Market volatility may make some clients feel particularly vulnerable to loss and fearful of staying in the market. As their advisor, managing those fears can sometimes feel like as much effort as managing their money. Reminding clients about the certainty of uncertainty may help ease anxieties, but you can go a step further.

Leverage the tools and resources made available through our award-winning Behavioral Finance Advice program in partnership with think2perform. Our BFA™-certified wholesalers provide guidance to help you help your clients. Interactive elements like value card exercises and other methods allow you to guide clients through their thought processes, underlying emotions and behaviors to help ensure their decisions align with their long-term goals. Learn more about these valuable resources by clicking the link below, and contact your wholesaler to get started. 

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Written by: Marshall Heitzman, CFP®, ChFC, FLMI, CPCU, BFA™

Marshall is a VP - Advanced Planning Consultant with CUNA Mutual Group and has more than 25 years of experience in the insurance and financial services industry. He consults Financial Advisors on advanced retirement planning concepts for retirement and wealth management clients.

SOURCES
1CNBC, Here’s how to keep emotion out of your investment decisions amid a volatile market, February 22, 2022
2The Balance, What Is Market Timing?, February 20, 2022
3CNBC, ‘With volatility typically comes opportunity.’ These are the smart moves advisors are telling clients to consider now, February 23, 2022

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Topics: Client Relationships