Skip to main content

Advising Clients When the Markets Are Volatile

Roger Wohlner writes that in periods of market volatility, it’s important for advisers to help their clients focused on their plan and their long-term goals.

The volatility in the stock market over the past couple of weeks has been sharp and severe. The market swings may be unnerving to some of clients, even the ones who have been through this before with their financial advisers.

In periods of market volatility it’s important for advisers to help their clients focused on their plan and their long-term goals.

Control What you Control

Taylor Schulte, CFP, of Define Financial, a fee-only financial planning firm in San Diego says, “Our guiding philosophy is to focus on things you can control. Predicting the future direction of the stock market is not one of those things. Extreme market events will happen, and we regularly set proper expectations with our clients, reminding them that investing does involve some uncertainty.”

Schulte adds, “We also factor those events into our financial plans and, therefore, our clients can feel confident staying on course when the market experiences significant downturns. This allows us to stay focused on the things we can control that really move the needle, like reducing taxes, maximizing insurance protection while lowering premiums, implementing charitable giving strategies, generating reliable income streams in retirement, and more.”

Focus on the Plan

Anna Sergunina, CFP, ChFEBC, of MainStreet Financial Planning says, “Let’s reshift our focus and remember that your financial and life goals are the most important. This is what we need to be keeping in front of us at times like these. Our goals and the steps we take to achieve them are what measures the success of your plan. Investment portfolios are tools that help you get there. And because you have a plan in place and a sound portfolio structure with buckets of money established for short-term, mid- and long-term goals, you have everything you need to withstand the storm."

Scroll to Continue

TheStreet Recommends

For younger clients, it’s important to stress to them that they are in this for the long haul. They have the advantage of time to benefit from compound growth. It's important to discuss that periods of market volatility and even some steep market downturns will happen periodically. Stress to them that these blips on the radar shouldn’t get them off their plan for saving for long-term goals like retirement or college for their kids.

For clients who may be a bit older, the same holds true but the conversation might be a little different. Talk to your clients who are near or in retirement about the lower-risk part of their portfolios, including cash reserves, and how that part of the portfolio serves to mitigate their losses.

Be a Good Listener

It's important to reach out to clients during periods of market volatility if for no other reason so they know that you are thinking about them. It’s also important to be a good listener. Maybe a client who is normally unconcerned about the direction of the markets is feeling a bit stressed about the markets this time. It’s important to understand what your clients are feeling in order to provide them with the best advice for their situation. Let them say what’s on their mind. When they are done, then respond to their concerns.

Help Clients Keep Things in Perspective

Large point declines on the Dow and other indexes might seem scary to clients, but it's important to remind them that the declines are not that great on a percentage basis with the markets at current levels.

If a client is concerned about the risk level of their portfolio and they want to reduce it a bit that’s fine. But it's important to ensure that any moves are made in a calculated fashion versus one that is made based on pure emotion. Emotions and financial decisions are rarely a good mix and it's important to emphasize this to those clients who might be feeling stressed about market volatility. Ideally, any adjustments would be done after the period of market volatility has subsided and things are a bit more stable.

Periods of market volatility are really when clients need guidance and calming influence. Guiding them through these periods is one of the most important things a financial adviser can do.