Your clients may be worried about the value of their investments and the state of the economy, among other things. As an advisor, you can’t predict the future, but you can offer well-thought-out strategies and sage advice.
In this article, we bring to you how financial advisors answer pressing client questions about current economic and market conditions.
Talking to clients in a volatile market can sometimes be difficult and uncomfortable. But having these conversations is necessary to ensure your clients feel confident working with you.
Before we dive into some commonly asked questions financial advisors face during a downturned market, let’s consider how you can best support your clients when things are looking unstable. Here are some best practices financial advisors should follow when discussing economic uncertainty with clients.
Don’t wait until clients reach out — offer support, information, and guidance right off the bat. While you don’t want to overwhelm your clients with a barrage of updates, you should let them know market shifts aren’t uncommon and that they are in good hands.
Sometimes, clients need a listening ear. Whenever clients reach out, respond quickly and professionally. Never leave your clients hanging for days on end. Offer clear channels where clients can reach out with questions or concerns.
Be positive and consider the things you can control when talking to clients. Now is a good time to focus on long-term goals and not get caught up in short-term possibilities. Consider what services you can offer to further help clients manage their financial well-being—like offering budgeting advice or providing tax strategies.
While you don’t want to focus on the hypotheticals, you also shouldn’t completely dismiss your clients’ concerns. Listen carefully so you can address the root issues with actionable solutions. However, you might also find that some clients want a friendly and supportive professional to speak with.
Your clients are likely exposed to a lot of news headlines and discussions that are centered around sensationalism. The most well-covered stories on the news or shared on social media platforms tend to be the ones with the most shocking headlines and claims.
Avoid voicing your own concerns if your clients feel the urge to vent. Instead, focus on reassurance where possible and transparency about the unknowns.
Set up a schedule to regularly meet with clients. Knowing that they’ll meet you soon helps alleviate their trepidations and alleviates their questions about when they will talk to you next.
Create a library of approved messages to post on social media or email to clients at regular intervals. However, don’t schedule your messages too far in advance, or they could be quickly outdated. You want to make sure your information is accurate and fits the current economic landscape.
Are you staying current with the latest news, trends, and data? It might be hard to listen to all the hype or uncertainty, but it can also help you know what your clients are hearing.
It’s easier to dispel a rumor if you’ve already heard it (and the counterpoint). You’ll have a more balanced view if you get your information from a variety of sources—especially the experts. And you’ll show more empathy if you also include the sources your clients are listening to.
Don’t put on a charade or act more confident than you are about the market or a client’s portfolio. While you don’t want to dwell on the negatives, you do want to offer honest and transparent advice above all else. If the numbers don’t look good, it helps to offer a clear understanding of the situation as well as a broader economic outlook.
Keep detailed notes on each client to help you pick up the conversation right where you left off at the next appointment. Remembering small details—like what they spend their free time doing or the name of their children—can help your clients feel confident you are listening.
Don’t give one-size-fits-all advice with a canned response to concerns surrounding market disruptions. Giving your clients personalized recommendations and assessments based on their goals, budget, and existing portfolio helps build trust.
While the start of the 2020s has given the term “uncertainty” a new depth of meaning, financial advisors have risen to the occasion. Guiding and supporting your clients through the unknowns has simply become a way of life at this point. Maybe you’ve become accustomed to addressing the multitude of questions thrown your way.
Many Americans still have the hard lessons of The Great Recession (2007 – 2009) fresh in their minds. Financial advisors and clients who endured the Great Recession have approached the turmoil differently this time around than those who didn’t experience it firsthand.
To learn what questions clients were bringing to their financial advisors – and the answers they received – we spoke with four of our experienced financial advisors. Here’s what we found.
It’s important to understand what matters most to your clients and offer solutions centered around their needs and goals. At the end of the day, your clients really want to know how the volatile markets and potential recession could impact their accounts.
A common fear among many investors—even in boon times—is running out of money in their retirement years. This is a basic yet profound question, particularly for clients in the withdrawal phase of their financial lives, who voice concerns about taking money from their accounts in a down market. Others are concerned they need to adjust their allocations to keep up with inflation.
Good financial advisors plan for down markets and don’t fixate on short-term performance. Financial advisors who focus on financial planning always bring clients back to their long-term goals and the overall purpose of their planning efforts. At their best, advisors are a calming influence, reminding clients why the plan is the plan and how changing it could prove to be detrimental to long-term success. Clients with a healthy liquid position, a common recommendation made by our advisors, can temporarily tap into that emergency fund to address rising costs of living expenses without needing to sell positions at a loss or dip into their long-term savings accounts.
As one advisor noted, “When you focus on performance, you pigeonhole your service. If the client conversation devolves into performance and asset allocation, you’ve started the clock on a client firing you.”
Absent a crystal ball, it’s just not possible to have a clear picture of how things will play out. Our financial advisors told their clients, “We don’t know how high inflation will go or how long it will last. Eventually, the Federal Reserve will cut rates, and markets can expect to normalize.”
Even economists don’t agree on what we can expect. Give your clients the reassurance of a positive outlook without guessing about timelines. As one advisor noted, “Usually, it’s an issue of education and helping them understand where they are and why.” The advisors we spoke to felt the best things they did were to provide confidence, education (using historical data as context), and direction to their clients.
We all feel the impact of inflation, layoffs, and now the collapse of banks. Five years ago, the idea of a pandemic shutting down the global economy wasn’t on anyone’s radar.
Our advisors remind clients that, historically, there have been many terrible things the world has endured (like the Great Depression or the stock market crash in 1987), and people still have money and are still making plans for the future. The markets still function. People are still investing and prospering.
Offering optimistic and objective guidance grounded in history is key to reassuring clients. Our advisors give high marks to the positive impact of providing clients with expert insights developed by market specialists like AssetMark.
Education remains an important element of client engagement. With so many news sources saying different things and conditions changing rapidly, clients are understandably confused. Confusion can often lead to fear. And fear can result in knee-jerk reactions or fear-based financial decision making.
Our advisors find it helpful to remind their clients that, while the environment has temporarily changed, their financial goals, the purpose they have for building wealth, and the fundamentals of the market have not. One advisor added, “If all you talk about is investments, you live and die by return. We talk about a lot of other issues, like estate planning and retirement, cash flow modeling, etc.”
Many clients find themselves faced with the two-pronged concern of taking systematic withdrawals from their retirement accounts in a down market while dealing with inflation that is raising the cost of consumer staples. Many clients are worried about regular expenses, like health care, car payments, student loans, or managing a small business. While every situation is different, our advisors’ approach was remarkably similar: meet with clients to go over their needs, their liquidity, their time horizon, and their risk tolerance to determine if they are taking on more risk than they should be.
For the most part, the advisors found themselves reassuring clients that their strategy was on track. And, if clients found themselves needing extra money, liquid assets were always available. In some instances, clients proactively reduced their withdrawals out of fear. Advisors circled back to each client’s financial plan to demonstrate that they could maintain their withdrawals without dipping into emergency savings or a high-yield savings account.
This question comes up frequently, no matter the economic activity or financial landscape. There is no magic number that applies to everyone for retirement, despite what some experts (or calculators) say.
All our advisors agree: retirement needs all come down to how you want to live your life.
Clients who really want to pinpoint a figure can work with their advisor to get a sense of what’s needed, but it differs for everyone. Retirement goals should be based on lifestyle (like whether the client wants to continue working in some capacity or travel a lot in retirement) and long-term outcomes (like whether the client wants to leave an inheritance).
In the most serene of environments, how bonds work and what impacts their performance can cause confusion. Bonds were top-of-mind for many individuals in 2022 when they cast off their typical role of “safe haven” for the times when stocks perform poorly. In 2022, bonds posted some of their worst returns since analysts started tracking bond performance. So, clients really started to pay attention.
The income offered by bonds can be helpful for investors concerned about rising prices. However, inflation can negatively impact a bond's price. A rise in either interest rates or the inflation rate usually results in a drop in select bond prices because inflation and interest rates move in the opposite direction from bond prices. Our advisors still recommend a diversified portfolio that includes both bonds and stocks.
Savvy investors understand that buying low can be a good long-term investment strategy. And many of our advisors’ clients sought to take advantage of lower stock prices. Is it a good idea?
As with most investment-related questions, the answer is: it depends.
Does the client have adequate cash on hand to invest? Are there indications that a stock’s price went down because of the macro environment, or was it because there was a fundamental flaw in the company’s business model or product? Would the purchase throw off their asset allocation percentages?
Perhaps most importantly, remember that timing the market is a tricky undertaking, and some would say impossible. Some advisors believe the costs of trying to time the market exceed the benefits of investing at the perfect moment. An advisor we talked to explained, “Nine times out of ten when we make a change, it’s because of what’s going on in the client’s life, not the market.”
From political turmoil to social divisiveness, it’s easy for investors to feel concerned about where things are headed.
Each of the advisors we spoke with mentioned how the political and social environment in the U.S. is compounding their clients’ economic fears. Clients are tying market volatility, job security, economic growth, and personal finance concerns to who is—or was—in political power. But the markets, not politics or headlines, affect one’s portfolio and financial situation. Gently steer the conversation toward the markets and try to focus on the things you can control, like reassessing your budget, reinforcing your long-term strategy, or recommending a way to diversify further.
As one of our financial experts explained, “The market doesn’t care who’s in control. It’s not as important as the speaking heads on the news tell you. Markets go up in all different cycles. And, the market controls what’s in your pocket, not the party in charge.”
One of the most important aspects of a financial advisor’s job is keeping clients calm and helping them understand what is going on, in addition to why and how it impacts them. Reach out to your clients and give them the opportunity to connect with you before they reach a state of panic. A proactive approach can help keep fears in check for your investors.
Often, clients just want to talk about what they are seeing, be reminded of the plan in place, and understand why certain decisions were made. Panic selling or moving to defensive strategies too quickly often leads to regret down the road when clients aren’t positioned for a recovery.
Trying to support your clients during trying times? AssetMark offers resources and guides to help. For more tips on building your practice during difficult economic times and beyond, download our new guide, Recession Proof Your Business.
Or request a consultation to speak to one of our team members about how to best navigate your unique business needs and better serve your clients.
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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