3 Things You Should Never Do in Volatile Markets
It’s your job as a financial advisor to stop your clients acting on emotion. You need to get across the fact that the financial plan you created is valid in all types of markets. To manage that, there are some things you should never do…
#1. Don’t appear stressed when the market’s volatile
In this profession you need to be able to cope with all kinds of outcomes without getting flustered. Instead of getting stressed and showing it, when the markets are down, you should have your game plan in place and your game face on.
You are the objective thinker, so put your emotions aside. Your clients on the other hand are subjective and their decisions are fraught with emotion of the “What if I lose everything?“ kind. You need to demonstrate emotional intelligence and control your emotions so you can control the emotions of others.
#2. Don’t lack assertiveness in uncertain times.
You know how the market works but your clients may not. It’s your job to communicate, calmly and confidently, the importance of long-term investing. If they sense you’re in any kind of doubt about this, they will channel your doubt many times over.
Explain to clients that by continuing to keep their investments in the stock market, they are safeguarding their future and putting their money to the most efficient use. The stock market will rise and fall but over the long term it will correct itself and it will continue to rise.
The antidote to panic is patience so ask them to trust you, not the headlines. By doing nothing and staying the course, they will beat the short-termers who later miss out on subsequent market gains. There’s a good reason famed investor Warren Buffett sticks with his ‘stay the course’ mantra.
#3. Don’t disappear when the market is volatile.
When the market goes down and portfolio values decrease your clients will look to you for advice on what to do. The first reaction they may well have is fear at seeing a drop in the value of their account. It’s surprising to hear how many advisors perform a disappearing act in the face of bad markets – possibly because they don’t know what to say, or haven’t considered how their clients might feel.
In fact, it’s at times like this that you most need to touch base with clients. Advisors who evaporate when the Dow is down lose their clients. You need to be prepared to talk to your clients both in the good and the bad times. When the markets tank it’s your cue to get on the phone and argue your case – otherwise clients will come to their own conclusions – conclusions which could result in them taking drastic and disastrous action.
If you demonstrate a poor understanding of your clients’ needs, they will fire you. If they look at their losses and you don’t call them for a conversation, they will decide enough is enough. You need to be forthright about poor performing investments otherwise your clients will feel overlooked.
Clients can tolerate the ups and downs of the market and changing economic circumstances if they feel their advisor is on the case and keeping them informed. Nobody likes being left in the dark when it comes to their money and this is especially true during tough market conditions. Simply receiving a call and knowing they are being cared about will help to reassure them and maintain the advisor-client relationship. If you hide under the desk when times are tough, your clients will sense something’s very wrong – so be proactive and reach out.
Your job is to get your clients to their chosen destination be it a comfortable retirement or sufficient funds to pay for their kids’ education. To ensure they achieve their financial goals it’s essential to keep them on track throughout the toughest of market conditions. Only the best advisors are prepared and proactive enough to face this challenge head on.