If the markets are to endure a bumpy ride throughout 2022, it’s important that advisers and planners have reassuring messages up their sleeves for anxious clients.
The economic fallout of the Covid pandemic, rising oil prices, and the increasing threat of war in the Ukraine have sent global investment markets into turbulence. Chances are that things may well remain that way for a while at least.
So, the big question is – what’s your message?
As Andy Hart of Humans Under Management says, “the behavioural adviser shines during the tough times”.
But it was only two years ago that we were telling people to ‘keep calm and carry on’ in the wake of the pandemic inspired market volatility. Many advisers reassured their clients by showing that despite World War II, Vietnam, Swine Flu, and SARS life went on, and the stock market continued upwards in the long term.
So rather than banging that old drum again and repeating the message, what can we add to it?
Here are three examples from advisers who’ve kindly shared their approaches to client reassurance during market volatility:
Jon Elkins, Smarter Financial Planning
“I tell clients that we can’t predict the future, but the reason we design a financial plan is because we know that something will happen. I describe a well-balanced financial plan in terms of the Superbowl.
“American football is a sport with a long and proud tradition, with offence and defence not only on the pitch, but also in the nature of the game. The ‘offence’ is all the razzamatazz and mania that follows when the word ‘touchdown’ flashes across the screens, it’s the cheerleaders, the singing – all the things the crowds love that ensures the stadiums are packed every time.
“The ‘defence’ is less showy – perhaps not as exciting as the offence – it consists of blocking out negative events i.e. the other team’s attack. But it’s good defence that wins championships, and without it, the team is doomed.
“In terms of investments, it’s the defence – having all the right things in place to protect your plan from volatility – that wins the game. Defensive strategies may come across as less exciting, perhaps even as boring, but they win through in the end.
“In other words, shoring up your finances against downside exposure rather than the (more sexy, but dangerous) bigtime upside exposure.”
Tom Skinner, Barnaby Cecil
“I remind people that the panic they experience when they see the value of their portfolio drop is natural, evolutionary even.
“Planning far into the future used to be a useless skill in prehistoric times. It was more important to simply survive one week to the next. Responding to threats quickly was crucial to our survival. Stoicism, in contrast, would’ve caused us harm.
“Even now, we’re naturally hardwired to respond to external stimuli. We cough if there’s smoke in the air. If you ignore that, it’s not long before the fire in the kitchen will overwhelm you. There’s therefore no point in saying: “Don’t feel anxious.” The coughing is telling you that you must do something.
“With that in mind, I encourage my clients to acknowledge their emotions and learn to live with them rather than try to avoid those feelings. It’s OK to feel anxious. Like most things that worry us, they pass.”
Jason Betteridge, Sutherland Independent
“Inspired by the Behavior Gap sketch from Carl Richards (see fig 1), we encourage clients not to panic. Anxiety can make our time horizons contract, which can be critical from an investment point of view.
“In the midst of panic it’s easy to become preoccupied with what’s happening now. And the risk is we forget all about the future. It’s a handy reminder that the viewpoint of any financial plan is always long term.
“We also remind clients that their plan is flexible and can take many routes. Even if we adjust it, the destination remains the same. One ‘route’ might mean travelling by motorway, another might mean travelling along a country or ‘B’ road. Both routes will get you to where you want to be, but one may include more bends or bumps than the other.”
In Summary
We know that, in general, clients find the numbers a turn-off. When the going is good, they probably don’t care about the detail too much, they trust you. That’s what they pay you for – or that’s what they think they pay you for.
It’s when things start to go awry that they pay attention, asking questions such as “what are you going to do about this?” “Can’t you make it stop?” While you can’t wave a magic wand, you can remind clients that this is a long-term game and holding your nerve under more volatile conditions is the mark of every great investor.
About Faith Liversedge
Faith Liversedge is an experienced communicator with a wealth of knowledge and understanding of the adviser profession. She was Marketing Manager at Nucleus for 5 years, creating innovative and award-winning campaigns. Before that she worked for Standard Life, Prudential and Royal London. In 2017 she set up her own consultancy to help forward-thinking financial advisers and planners to become more profitable through websites, communications and other laser-focused marketing techniques.
