Financial Advisor Do’s and Don’ts During Extreme Market Volatility

Financial Advisor Do’s and Don’ts During Extreme Market Volatility

Financial advisors play a vital role in helping clients achieve their most important financial goals. But where they really earn their fees is during times like these, when helping clients navigate the choppy waters of extreme market volatility. Clients look to their advisors to guide them through scary times and reassure them that everything will be okay.

Emotions run high when the market turns volatile. When stressed, humans instinctively want to do something and take some kind of action to reduce or eliminate the threat. That’s when mistakes typically occur. The value of a financial advisor rises in direct proportion to the anxiety levels of their clients, who look at volatile market swings as a threat to their financial security. The critical role of financial advisors is to keep their clients from making costly behavioral mistakes. During periods of extreme market volatility, there are some things advisors must do and things they should avoid doing to maximize their value to their clients. Here are a few.

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The Slippery Slope from Empathy to Role Reversal, and How to Avoid It

The Slippery Slope from Empathy to Role Reversal, and How to Avoid It

Successful financial advisors know that expressing empathy is critical in helping them to connect with clients and solidify their relationships. Clients need to know you understand their circumstances and what they may be going through at any given time. However, empathy taken too far can backfire when advisors find themselves sharing the same emotional distress as their clients, which can threaten their objectivity and compromise sound planning advice.

At the extreme, this can lead to advisors relinquishing control of the relationship to their clients and acquiescing to their desire “to fix the problem” in the short-term at the expense of their long-term plan. This type of role reversal is not uncommon for advisors who become emotionally vested in their clients, wanting to do what they can to ease their pain. Suddenly, the relationship is no longer being guided by rational, objective advice; but rather the behavioral impulses advisors are supposed to prevent, such as selling into a steep market decline, or abandoning the long-term strategy just to alleviate the immediate suffering.

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Educate Clients about Market Volatility so They Can Confidently Stick to the Plan

Educate Clients about Market Volatility so They Can Confidently Stick to the Plan

Happy New Year from all of us at Don Connelly & Associates! Hopefully everyone will enjoy good health during the new year, achieving great success both personally and professionally.

As promised, this week we’re posting the second part of the recap blog post, covering two more popular topics our community of Advisors was most interested in during 2020 – market volatility and how to communicate with prospects and clients about it. We’ll also share a few stories and analogies you can use to convince clients to stick to the plan, no matter the market conditions.

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