Volatility & Bear Market Tool Kit Archives

Why You Need to Encourage Your Clients to Ask Questions

/ by Don Connelly / Best Practices / 0 comments

As a financial advisor, you occupy a position of trust, guiding clients through complex financial landscapes. While knowledge and experience are crucial assets, an advisor’s success hinges on another critical factor: fostering a culture of open communication where clients feel empowered to ask questions. This often-overlooked attribute can unlock a multitude of benefits, leading to more effective financial planning, stronger client relationships, and, ultimately, a brighter financial future for the client.

5 Relatable Analogies to Explain the Perils of Market Timing to Clients

/ by Don Connelly / Investing Wisdom, Storytelling, analogies and power phrases / 0 comments

Let’s face it: Most people are lousy timers. Think about the last time you switched to the shortest line at the grocery checkout. That feeling of smugness turns to scorn when the line crawls to a halt while the longer lines churn through.

Or, when you constantly switch to the fast-moving lane on the freeway only to watch a long river of red brake lights stretch out in front of you. The actual cost, in terms of time, frustration, and dignity, almost invariably exceeds any possible gain you might have achieved by making the switch.

The stakes for investors seeking bigger gains or cutting losses by timing the market are much higher.

Financial advisors know that few people, if any, are adept at picking winners or predicting the market’s direction. Yet many still try, often driven by the powerful emotions of fear and greed.

How to Educate Clients About the Importance of Investing Beyond Their 401(k)

/ by Don Connelly / Investing Wisdom / 0 comments

For most people, there’s little to think about when it comes to making contributions to their 401k plans. They enjoy reduced current taxes, deferred taxes on account earnings, and, for most, a matching contribution from their employer. That’s a huge incentive to contribute as much of their earnings as possible—up to $23,000 in 2024, and those over 50 can add $7,000 in annual catch-up contributions.

But is maxing out 401k contributions really the best retirement savings strategy for your clients?

While deferred taxation in a 401k is great for capital accumulation, they will owe ordinary income taxes on their withdrawals, impacting their cash flow in a critical life stage. Many retirees are shocked by the amount of taxes they owe on their retirement income.

Should FAs Allow Clients’ Political Opinions to Influence Their Investment Decisions?

/ by Don Connelly / Investing Wisdom, Managing the Relationship / 0 comments

Here we are again—another presidential election year. If it’s like the last couple of elections, financial advisors are sure to see some clients wringing their hands over which candidate will win the White House and how that will impact the financial markets and their investments. At the very least, you’re likely to get an earful of some clients’ political viewpoints—which is fine if they don’t try to correlate them with how they should invest their money.

For decades, investors have tried to find some correlation between elections and investment performance, hoping it will foretell how a particular outcome will impact their portfolio so they can adjust their investment strategy appropriately.

Of course, if you search far enough, you might be able to uncover data that supports such a link. But you’re not going to find any that decisively shows a causal relationship or enough of one to warrant serious consideration for changing investment strategies based on election results. Still, some clients have such strong political views that they see a connection in all aspects of their lives, including how they invest their money.

Get More from an Advisory Relationship with Client-Centric Investing

/ by Don Connelly / Managing the Relationship / 0 comments

With the 2008 global financial crisis fading in the rearview mirror, investors are slowly regaining their confidence in the stock market with a halting willingness to take on more risk. However, many still find it challenging to overcome the trust deficit created by financial advisors who view them as assets to be managed rather than people with life ambitions.

To those advisors, the market indices and benchmarks mattered most. However, to the client, it was all about their financial future. All too often, advisors focused on standard deviation, Monte Carlo analysis, and risk-return lose sight of the emotional characteristics that drive investor behavior. They then become perplexed when their clients decide to break from a perfectly good investment strategy to follow the herd over a cliff near a market bottom.

6 Essential Investment Tenets to Instill in Your Clients for 2024

/ by Don Connelly / Investing Wisdom / 0 comments

The stock market has taken investors on another wild rollercoaster in recent years. The market recovered from a bear market in 2022, and after a solid up year in 2023, there’s bound to be another one at some point. Going into 2024, the market will keep investors guessing, which is why helping your client maintain a long-term perspective is essential.

We can’t know what stocks will do today, next week, or next month. But we know that, over the long term, stocks will continue their century-long advance. Reacting to short-term swings in the market means moving in and out of the market at the wrong times, locking in permanent losses, and often missing out on the biggest gains in the market.

It’s Time to Have Another Conversation with Your Clients About Risk

/ by Don Connelly / Investing Wisdom / 0 comments

With the stock market setting its sights on new highs, is it time for advisors to have another serious conversation about risk?

With all that is going on across the globe—war in Ukraine and the Middle East, persistent inflation, rising interest rates, a looming recession, and a divided government likely headed to another fiscal cliff—the stock market appears to be climbing a wall of worry. But how long can that go on? When will it end?

As the market nears new highs, that is the question being asked with increasing regularity by market analysts, media pundits, nervous investors, and financial advisors alike. While the question is palpable, the answer is not so obvious.

When Markets Are in Transition

/ by Don Connelly / Investing Wisdom / 0 comments

The stock market is not static. It’s always in transition, more often than not triggered by economic uncertainty.

Listen to this 1-minute audio or read the transcript below to hear an idea about calming clients’ fears and refocusing them during times of uncertainty.

Overcoming Information Overload: What Advisors Can Do to Help Their Clients

/ by Don Connelly / Best Practices / 0 comments

Living in the digital world, with its instantaneous access to information, has made us smarter and more empowered. In many ways, it has leveled the playing field for clients who now have access to much of the same information once only available to investment professionals. Information is so highly valued that it is churned out 24/7, accessible on any number of devices people carry around. For clients especially, this should be a good thing, right?

The barrage of headlines and hype around market events often leads to behavioral mistakes, like following the panicky herd over the cliff during a market selloff or frantically trying to buy into the market after a massive rally. Studies show it is the primary reason why investors consistently underperform the market.

Winning the “Why Do I Need a Financial Advisor” Argument

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Winning the Why Do I Need an Advisor Argument

Long before it became a field of academic study, legendary investor Benjamin Graham knew a thing or two about behavioral finance. Graham went on to say, “In the end, how your investments behave is much less important than how you behave.”

For financial advisors, understanding how emotional and intellectual processes combine to influence investors’ decisions offers the opportunity to help their clients avoid costly mistakes and optimize investment outcomes.

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