Veteran advisors have some advice for colleagues trying to calm jittery clients: Stop telling the same old stories about volatility.
During February’s market fluctuations, planners and pundits dusted off their well-worn adages about “timing the market versus time in the market” and holding their clients’ hands—but advisors can offer much more than pithy maxims, said David Bach, co-founder and director of investor education at AE Wealth Management.
“It’s important to always be in front of the conversation about market risk. Don’t just call your clients with a formulaic bullet-point conversation,” said Bach. “The conversation should be more along the lines of ‘I wanted to check in with you to see how you’re doing.’ Then let the client talk. Listen, take notes, and if they’re really scared, that’s when you can get them back into the office face to face.”
Bach is also an advocate of proactively preparing clients for volatility and corrections through conversations, videos and print materials.
But what about the clients who call advisors worried because their account balances have taken a serious hit?
“The first question I always ask is ‘Have your goals changed?’ because, if not, we’ve already planned for volatility,” said Rose Price, partner at VLP Financial Advisors in Vienna, Va.
VLP also takes a proactive approach to educating clients about volatility through communications, and gauging their responses to market events. “[During] this latest volatility, we sent out our market outlook and commentary and all the responses were, ‘Do you see a buying opportunity?’ and ‘We aren’t worried,'" Price said. "It took some time … but now we have clients who see volatility as an opportunity instead of the sky falling.’”
Other advisors prefer to respond to concerned clients with direct questions. John Gugle, a financial advisor at Charlotte, N.C.-based Alpha Financial Advisors, asks clients who want to get out of the market when would be the best time to go back in. The question helps would-be sellers realize the folly of selling low to buy high later, he said.
Marguerita Cheng, CEO of Potomac, Md.-based Blue Ocean Global Wealth, has seen similar questions work, adding that advisors have an opportunity to discuss the difficulty of market timing with their clients and note that defensive selling requires timing the market twice: once to sell out, and once again to buy back in.
“As for me, I focus a lot of expectations,” said Cheng.