Communicating in a crisis: how to help clients stay positive

by | Sep 13, 2022

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Written by Mike Deverell, investment analyst at Equilibrium Financial Planning

Finding optimism in the current economic outlook is a challenge to say the least. It has been a difficult year for investors so far with almost every major asset class losing money.

Against a backdrop of record inflation, higher interest rates and signs of a slowing economy, volatility is certainly a common theme.

Despite the plethora of headlines painting a grim picture of the markets, this isn’t the end of the world for investors, and it’s crucial that this is communicated to clients who are likely feeling nervous about the fate of their investments. Here, Mike Deverell, Investment Manager at Equilibrium Financial Planning discusses how financial planners can help to keep confidence up, and provide the necessary reassurance in volatile times.

Touch on the past, but focus on the future

Although it may seem like it for some clients, this isn’t the first bear market. Whilst stocks around the world may be falling below 20% (Source: Financial Times), it’s important to emphasise to clients that this isn’t uncommon. In fact, they tend to happen on average roughly every 5.3 years. As a result, they’re a normal part of investing and usually don’t last for extended periods of time. Illustrating this to clients by providing them with examples of how the markets have recovered from previous turbulent times can help to give them the confidence that this won’t last forever.

It’s worth bearing in mind that long-term clients may feel more reassured; the likelihood is that they’ve worked through volatile periods with their financial adviser previously and have seen how they successfully navigated them through this. However, for newer clients, those who may be younger, relatively new to investment or have come into wealth suddenly, they may not have noticed or experienced a market like this one before.

Encourage a long-term view

Investing is a marathon, not a sprint. Ideally, it happens over an extended period of time, even a lifetime, to ensure the chance of the best returns and to ride out any ups and downs. Therefore, it’s important to encourage clients to think long term and avoid making impulsive, emotion-driven decisions to withdraw or sell their investments. Having a long-term financial plan in place should help clients to focus on the end objectives and look beyond the present.

Furthermore, with volatility often comes opportunity, including chances to enhance long-term returns by buying assets on the way down. Communicating with clients around the action that investment teams are taking to monitor, tweak and rebalance portfolios to ensure the best possible risk-adjusted returns in the long run will help clients to understand how there is opportunity for gain, even in challenging times.

Be transparent about your response

At Equilibrium, we’ve provided our clients with numerous resources to communicate the actions we’re taking to adjust to the economic outlook. We’ve held an in-person event, as well as created a video series and a number of written articles to help our clients understand what’s happening in the investment world and what we’re doing to protect their money.

Every client will have a different response to the situation dependent on varying factors such as their attitude to risk and experience investing. However, all of them are likely to be grateful for open communication around the actions their financial planners are taking to navigate them through the crisis.

Ensure advice is accessible

It goes without saying that advice needs to be tailored and personalised to the client. However, the information being communicated also needs to be accessible to all, for example, through providing a multitude of ways to access it, as we have at Equilibrium. Clients will have differing communication preferences, and some may require further detail that is more specific to their own situation, in addition to the general communications being provided. Due to this, advisers need to be available to listen and provide guidance, helping clients to feel reassured and secure and building on the relationship to further cement trust.

Another consideration to increase accessibility is to avoid financial jargon where possible. For clients with a very sophisticated knowledge of investment, it may well be suitable to discuss what is happening in detailed, complex terms. However, other clients may benefit from a more visual representation or an analogy to increase understanding and engagement. Communications should be adapted with this in mind, as the more people understand, the more confident that they’ll be in what lies ahead.

Conclusion

With uncertainty and volatility predicted to stick around for a while, financial advisers have a crucial part to play in guiding their clients through the coming months. Whilst optimism might currently be hard to find, there is subtle signs that investor sentiment might be on the rise. It could take something as small as inflation data showing that price increases are slowing or that the economy is proving more resilient than expected to spark a rally in the markets and a shift in mood.

Advisers can help clients to maintain a positive financial mindset by providing clear information, tailored guidance and examples of previous market recovery. Furthermore, emphasising the opportunities that can arise from times of volatility, as well as encouraging a focus on the future, will help clients to maintain confidence in their financial planner and their investments.

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