The last bull market, which ended in 2020, lasted 3,999 days. That means if you have been a financial advisor for less than a decade, you are now experiencing the first protracted market downturn of your professional career—and it’s stressful. Like parenthood, no matter how much you’ve studied and heard about it from those who’ve been through it before, downturns can catch you off-guard.
If you are an Office of Supervisory Jurisdiction (OSJ) or Manager with advisors reporting to you, you probably have a good number of downlines who need extra encouragement, context, and guidance. So, you’ve got both clients and employees who need your calm assurance and counsel.
If you are an independent fee-based advisor, then current conditions are not only affecting your clients, your employees, and possibly your sleep, but odds are your bottom line is feeling some impact as well. Your revenue is a function of AUM that is declining thanks to market performance.
However, the news isn’t all bad: a market downturn can lead to opportunities. Investors often realize the need for financial advice during volatile times and your firm could be a beneficiary of that realization. Sixty-two percent of Americans say their financial planning needs improvement, yet only a third seek the help of a financial advisor. That remaining two-thirds represents a lot of investors who might soon be looking for professional financial advice.
Additionally, uncertain times present you with an opportunity to showcase your value to existing clients. But it can be a challenge to do this effectively if you are distracted by the demands of business ownership.
Market downturns require advisors to move beyond the standard business plan and delve into the demanding world of making lemonade out of lemons…when you don’t know how many lemons are coming your way, or for how long. Ideally, your aspiration is to thrive in a downturn of any duration and magnitude. Your goal is at least to get through it. Let’s look at both scenarios.
The best challenges are those that can be transformed into opportunities. To paraphrase Louis Pasteur, fortune favors the prepared. So, how do you get ready for a market downturn? As with any crisis, you need a plan AND the resources to execute the plan. For example, what’s the point of keeping a flashlight handy if you don’t have batteries?
Similarly, to meet the challenges of a market downturn head-on, it’s best to have a plan in place prior to needing it. And that plan, at a minimum, should cover the “Five W’s” of both practice management and business growth.
As you manage the financials and emotions of your clients, you may find you’ll be doing the same for staff. How you communicate with these stakeholders during tough times is a determining factor in their level of confidence in your leadership.
Historically, “companies that have bounced back most strongly from previous recessions usually did not cut their marketing spend, and in many cases actually increased it." However, they did change how they focused their marketing energy.
While every market downturn and recession share similarities, each is unique. Even the most comprehensive, well-thought-out plan may need tweaking. Moving beyond your plan and being agile is key to emerging stronger than before. In any and all situations, one rule reigns supreme: Clients. First. Always.
If you’re not in a position to maximize potential opportunities arising from market uncertainty and economic volatility, you can weather the storm. The intangibles that you and your team bring to the table haven’t disappeared. The relationships you’ve nurtured with your clients still exist…and will more than likely deepen as you help them navigate rough investing waters.
In terms of seeing your business through the downturn, there are some best practices to adhere to:
Clients are the lifeblood of every financial advisor’s business. During stressful and confusing times, they will rely on you to offer objectivity and informed guidance. Market downturns and/or recessions are certainly not considered business as usual, but it’s important to maintain your service offering–especially your quarterly client reviews. While each client’s unique situation will drive the discussions, use the schedule below as a starting point for setting the agenda.
Whether you are prepared for volatility or not, lean into the situation. You can’t control the economy or the markets, but you can control your reaction. You also possess a valuable superpower: you have the ability to ease your clients’ anxiety. Be present for them. Pivot without compromising your core value proposition and standards. When the dust clears, your clients will be grateful for your steadfast support, your employees will be better prepared for next time (yes, there will be a next time…), and you’ll stand out among your competitors.
To maximize your efforts, be sure to ask your outsourcing provider for materials to support you and your clients.
If you’re working with AssetMark, ask about our Market Volatility Tool Kit, which provides educational materials that can help your staff stay informed and that you can send to your clients—from email and video templates to white-labeled resources that you can add your logo to and share with your clients.
If you’d like to learn more about these AssetMark services, as well as other support capabilities available from AssetMark, talk to your AssetMark consultant.
AssetMark is a leading provider of extensive wealth management and technology solutions that help financial advisors meet the ever-changing needs of their clients and businesses.
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