I am lucky enough to be of an age where I can remember advising clients during the last period of high inflation, bear markets and – dare I mention it – recession.
Now I am enjoying my semi-retirement and relying on the investments and pensions I have accumulated in the good years.
Meanwhile, US stocks are nearing or exceeding a 20 per cent drop from the dizzy heights of their peak, the FTSE is at its lowest level for a year and economists are predicting a possible recession.
Poor performance in technology stocks is dragging down global indices, along with many retirement portfolios. The war in Ukraine continues. Inflation is set to reach 11 per cent. Central bank interest rates are increasing around the globe and economic growth is slowing.
It is a frightening picture, but because I remember the late 1980s and early 1990s, my concerns and worries about the markets are tempered by my knowledge and experience.
However, for a lot of clients and advisers the current situation is completely alien and may appear even a little apocalyptic. There is no magic bullet or wand. We are likely to be in for a bear market and it could be a challenging couple of years.
What you need to keep in mind as a financial adviser is that clients are not immune to the headlines. Many will be worried. Advising clients when values appear to keep falling and headlines are gloomy is hard. Emotion can start to take over. But remember, advisers who are proactive and work with their clients to address their concerns are likely to come out stronger, with more resilient relationships and greater client retention.
We have all heard of the ostrich syndrome – sticking your head in the sand and ignoring everything around you. In the current market that is just a recipe for disaster. We should be doing the opposite. It is really important to remain calm and focus on the long-term objectives of each of your client’s portfolios.
Communicate confidently and have a clear message
A good start is to let your clients know you are on top of things. Make sure you keep in regular contact and update them of any developments. Use every opportunity and communication channel you have to stay in touch with clients to:
- acknowledge the current position of the market;
- explain why it is happening;
- talk about the concerns that clients have;
- share investment commentaries from fund managers;
- reiterate the long-term nature of investing and that fluctuations do occur;
- re-emphasise the personal goals and objectives that clients are striving to achieve, and;
- explain the investment process clearly and effectively, so that your client understands it.
That is the easy part. The real challenge is how to respond to what appears to be both a volatile and falling market. How do you remain focused and clear headed enough to ensure the best outcomes for your clients? And what are some of the strategies and tips that you should consider?
Stick to your investment model and processes
Investment models and processes are there for reason. They support the longer-term nature of an investment and are not intended to chase returns or to avoid shorter-term challenges.
Certainly, you may wish to review your clients’ risk profiles. It is always worth assessing whether or not their appetite for risk has grown or diminished. Likewise, it is worth reviewing their capacity for loss. Personal circumstances may have changed and had an impact on this too.
