During market downturns, your clients will lean on you for wealth management decisions that take their needs and goals into account. Although every client profile may require tailored plans and conversations, these financial advisor tactics can be key for many clients. Make sure you and your clients are set up for success with these top five tips.
A client profile is a hypothetical persona created to model your ideal target client's interests and help you develop and fine-tune your service offering and messaging. While client personas can be unique to your firm or services, here are two types that commonly arise when clients seek out financial advisory services and how they react to market volatility.
This client profile is a novice investor, new to the market, and possibly their wealth as well. They may have a significant amount of wealth but came to it through a small business venture or unexpectedly and are unsure of how to manage it or invest it. They likely do not follow the markets and need to lean on the advice of a financial planning expert.
With market volatility, these investors may not be certain of what’s going on in the market, but they are certainly concerned about the investments that they’ve entrusted with their financial advisors.
In contrast, this client profile actively buys and sells stocks. They’re confident in their knowledge of the market and what is best for their investments, but they may not have a disciplined plan. Their investment decisions are often focused on the here and now, seeking instant results, without thinking about how it can affect their finances in the long term.
As soon as they see a downturn in the market — or if they aren't seeing results — they’re quick to withdraw their investments.
Read more about the essentials of client segmentation to better serve clients.
With the recent market volatility, client profiles and strategies are starting to change and new challenges arise. When navigating client dreams and goals, financial advisors need—now more than ever—to review their client experience and have a variety of core and personalized strategies ready for every client profile. Here are the top five investment management strategies for financial advisors and clients during market volatility and downturns.
When your clients invest their money, often they want to see results within days of investment. This immediate pressure may come from different perspectives — a sense of urgency from the vigorous investor, or a sense of nervousness from the novice investor.
Financial advisory is a people-orientated position. When faced with nervous clients, it's your job to keep them calm and focused on the long-run investment. While markets have their volatility — which we'll discuss later — acting instantly and selling too soon without deliberate strategic planning has the potential to lead to more loss. On the flipside, not diversifying enough investments due to a lack of risk willingness can also lead to loss. It's important to work with your clients individually to set clear, realistic expectations at the start.
During times of high volatility remind your clients that their financial plans were made with downturns in mind and that making rash decisions can derail long-term goals. The best thing they can do to achieve their goals is to stay the course.
As previously stated, not every client is excited about the idea of losing money. Who would? However, not taking risks also means missing out on the potential gains, as the funds stagnate. On the other side of this approach, some clients want to quickly pull out of the market. Striking a balance between the overly cautious and not cautious enough can be a difficult one, but it is something that is solved easily: with transparency.
Tying back into strategy one, the tactical strategy you set with your clients should account for any potential risk in the market. There are volatile times where that strategy may need to be altered, but overall, being honest in your reasonings behind investments can help put wary clients’ minds at ease. AssetMark provides advisors with the right tools at your disposal to account for the risk profile of every potential client, making it easy for you to lay out any potential risk and answer follow-up client questions.
This strategy might be a basic strategy, but that doesn't make it a less important one. Regardless of profile, diversifying your clients’ bonds and stocks is a key element in making sure there is a higher chance of return on their investments. Clients’ investments should be broken up into multiple industries, including international accounts as well.
While stocks may fluctuate with market volatility, bonds should stay relatively steady throughout the industries. However, there can be times of large market volatility that can alter both markets. It's during these times that, once again, you should encourage your clients to think about their long-term game plan before rapidly selling.
Let's talk a little more in-depth about volatility. Due to various influences, the market can fluctuate, sometimes more rapidly than we'd like. This year is predicted to be a tremulous year as the United States faces a labor shortage, supply chain localization, inflation-driven supply shortages, and political turmoil. While we can never truly predict the future, AssetMark can support advisors with key forecasting data to better understand the trends of the market and assist in building individualized client plans for the long term.
Clients value personalization. They want their concerns to be seen and heard. No two clients are the same, even within their specific profiles. The timid investor may need more explanation of the market than a vigorous investor, or vice versa. It's important to sit down and discuss specific goals, in order to provide them with a personalized response.
If you think you are communicating too much, think again. While there is such a thing as over-communication to a nervous investor who asks questions at every turn, your clients should feel confident in the plan you have successfully laid out for their investments to follow.
Even in the face of new trends or volatile markets, you should feel confident in the solutions you are bringing to the table. AssetMark's services are clear and transparent at every step, so you not only know what choices are being made for your clients’ plans but also why they are being made. AssetMark is here to support advisors in providing their clients with all the services they need.
Learn how AssetMark can assist financial advisors in building long-term relationships with their clients, by scheduling a consultation today.
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AssetMark, Inc. ("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. The information on this website is for informational purposes only and is intended as an overview of the services offered to financial advisors, not a solicitation for investment. Information has been drawn from sources believed to be reliable, but its accuracy is not guaranteed and is subject to change.
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