{"id":4481,"date":"2020-03-02T16:30:00","date_gmt":"2020-03-02T16:30:00","guid":{"rendered":"https:\/\/emoneyadvisor.com\/blog\/how-to-talk-to-your-clients-about-market-volatility\/"},"modified":"2021-02-02T15:36:43","modified_gmt":"2021-02-02T15:36:43","slug":"how-to-talk-to-your-clients-about-market-volatility","status":"publish","type":"thought_leadership","link":"https:\/\/emoneyadvisor.com\/blog\/how-to-talk-to-your-clients-about-market-volatility\/","title":{"rendered":"How to Talk to Your Clients About Market Volatility"},"content":{"rendered":"\r\n

Market volatility can be a nerve-racking experience for anyone. As most advisors know, clients tend to panic-sell during sell-offs, or at least attempt to panic-sell, which minimizes their participation when markets eventually rebound. This results in \u201csub-par\u201d returns over time. Having spent 7+ years as an advisor at Merrill Lynch, I\u2019ve seen this pattern of behavior again and again during market volatility.<\/p>\r\n\r\n\r\n\r\n

Typically, as advisors, we try to alleviate client anxieties by explaining that market fluctuations are normal\u2013they don\u2019t move in straight lines. We explain that these fluctuations are an opportunity to add to attractive positions so that we take advantage of volatility rather than allow our portfolios to be victimized by it. We may even use some hindsight example like \u201908 \u2013 \u201909 to highlight that even in the most turbulent markets, portfolios recovered so long as clients stayed invested and could participate in the eventual rise.<\/p>\r\n\r\n\r\n\r\n

But we should be asking ourselves: What else can we be doing?<\/p>\r\n\r\n\r\n\r\n

Putting the Financial Plan in Perspective Combats Tunnel Vision<\/strong><\/h3>\r\n\r\n\r\n\r\n

Each morning, I drive into work, usually arriving by 8:00 a.m. with meetings and calls starting at 8:30 a.m. My hour-long commute includes periodic bouts of \u201clight\u201d traffic, but occasionally it\u2019s especially heavy, threatening to make me late or miss my early obligations. It\u2019s in these moments that I find solace in Google Maps, and its real-time \u201carrival time\u201d projections.<\/p>\r\n\r\n\r\n\r\n

When I begin to feel anxious that traffic is going to derail something in my schedule, my \u201ccommute-advisor,\u201d Google, more often than not reminds me that I\u2019ll actually arrive in time. What it\u2019s doing, importantly, is allowing me to connect the dots between my objective (to arrive in time for an 8:30 a.m. meeting) and my current position. With help from my \u201ccommute advisor,\u201d I can see that despite what\u2019s happening around me, I am still very much on track. Is wealth management any different?<\/p>\r\n\r\n\r\n\r\n

We all get tunnel vision from time to time and, understandably, this is especially true for clients in turbulent markets. But whether commuter or client, there\u2019s something to be said for focusing attention on the end game.<\/p>\r\n\r\n\r\n\r\n

Financial Planning Techniques to Coach Clients Through Market Volatility<\/strong><\/h3>\r\n\r\n\r\n\r\n

Bouts of volatility present an opportunity to reframe the conversation by placing \u201cperformance\u201d in context, and remind clients that their objectives, which they came to you to address in the first place, may still be very much on track.<\/p>\r\n\r\n\r\n\r\n

Rather than focusing exclusively on portfolio and individual security performance, pivot to metrics and planning techniques which take a longer term view:<\/p>\r\n\r\n\r\n\r\n