Coaching Clients through Volatility

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While 2019 has been fantastic for the market, volatility is still an ever-present risk. Sustained volatility is hard to stomach, sparking emotional decision-making and attempts to time the market. In fact, according to E*TRADE’s Independent Advisor Sentiment survey, advisors noted that the biggest mistake clients make is trying to time the market.

As stewards of client’s nest eggs, advisors are critical to helping them weather volatility and honing their focus on long-term investing goals, rather than short-term decisions. Here are three tips to corral clients’ emotional investing decisions:

  • Acknowledge their concerns. According to E*TRADE’s survey, the biggest client concern in the past few months has been volatility. As a seasoned market participant, you know that volatility is normal; but it can be very scary for the typical main street investor. The reality is a two to three percent move in the market is normal, but when there is a 300-point market decline, it can feel dire. Once it becomes a headline flashing on the news, it amplifies investor anxiety. In order to build trust and deepen your rapport with clients, acknowledge their concerns before diving into any tactical moves.
  • Refocus on long-term goals. Remind your clients to maintain discipline, focus on their goals, and remember the bigger financial picture. Selling in a volatile market can exacerbate losses. Meeting with clients on a regular basis to review their portfolio, revisit their goals and recalibrate their risk tolerance is a great way to help keep them focused on the long term. It also helps further your trusted advisor-client relationship.
  • Prioritize education. Education is critical to helping clients contextualize volatility. Host events or webinars to scale educational efforts, which comes with an obvious added branding and marketing bonus. In addition, tapping experts within your network to speak at events builds trust through third-party credibility.

With volatility at the forefront, investors are faced with the challenging decision of playing the market or staying put and risking losses. That’s where advisors come in – to keep clients on the most responsible path toward meeting their goals. Squarely focusing on client needs, especially in times of volatility, is critical to not only maintaining client relationships, but also cultivating new ones. Now more than ever, advisors have the opportunity to demonstrate their value to their clients by helping them tune out the noise and focus on the long term.

Mike Lover is vice president of strategic business development at E*TRADE Advisor Services.

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