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Staying the course Thumbnail

Staying the course

Instilling client confidence in the face of market noise.


Highs and lows may be the natural rhythm of the economic market, but that doesn’t make it any easier for advisors who need to maintain a sense of calm for their clients. While none of us have a crystal ball, we can be fairly certain that some sectors will continue showing volatility and that geopolitical issues like trade wars and civil unrest will continue creating drama.

Without sounding too clichéd, there is a lot of solid advice that advisors can offer clients during times of volatility. Here is some classic investment advice that has stood the test of time.

Patience

“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” – Paul Samuelson, Nobel Prize–winning economist1

“Your portfolio is like a bar of soap. The more you touch it, the smaller it gets.” – unknown2

Just as sure as the sun will rise tomorrow, markets will fluctuate, exciting trends that seem like a sure bet will grab everyone’s attention, and the shock of a price correction will cause stomachs to churn.

Philip Petursson, Chief Investment Strategist with Manulife Investments, says the best piece of advice that advisors can give their clients is to have patience. “We all want that excitement of a big stock price jump, but it never goes in just one direction,” says Petursson. “Investing should be slow, methodical – inches as opposed to leaps. If you do that, over time you tend to do better.”

Many successful advisors coach their clients to build wealth with modest 5 to 7 per cent investment gains – slow and steady, safe and reliable. Advisors should help clients figure out what they want to achieve, and match up their goals with the right level of investment risk.

Tip #1: Communicate early and often

This is the time to put on your empathy hat and put yourself in the client’s shoes. Dramatic business news headlines about market volatility can easily cause panic to set in. Think of that newly retired mechanic who might be wondering if his investments are taking a big hit, or the parents getting set to write some big cheques for their daughter’s university tuition.

Avoid the communications vacuum and reach out to your clients before they call you. You are more likely to be on top of the market than they are, and you are well positioned to be their voice of calm.

This is also your opportunity to show leadership and strengthen your advisor-client relationship. Rather than waiting for your next scheduled meeting, you can proactively reach out to provide context on a financial development, while also educating your client on the natural ups and downs of the market.

Feelings

Feelings can be a little counter-intuitive with investing. Client emotions about turbulent markets can cloud judgement and lead to frantic phone calls. Is there a place for emotions when it comes to investments? The experts say no, but that’s not reality for your clients.

“Normally if you’re thinking of doing something and you get that queasy feeling, you shouldn’t do it – except for investing,” says Petursson. “When it comes to investing, feelings don’t really fit.”

It can be tough for your clients to see markets drop by 10 per cent, and this is when an advisor’s solid confidence is needed most. The idea that market drops can generate buying opportunities is an important message to convey. And encouraging clients to stay the course also creates the perfect opportunity to remind them of the value of having a professionally managed portfolio.

Tip #2: Know your clients

There is no one-size-fits-all approach to communicating with your clients. Understanding what they need from you begins to build a foundation of trust. Take the time to identify which clients may need a lot of support and assurance, and then communicate with them in a style they prefer. This could be a phone call, face to face, an email, a text message or a FaceTime touchpoint.

If emotions seem to be running high, do a bit of digging during your conversation to see if there is an underlying reason. Maybe someone is going through a career change, or there is an illness in the family. There can be more to the story than market volatility.

This too shall pass

“In the old legend the wise men finally boiled down the history of mortal affairs into the single phrase – This too will pass.” – Benjamin Graham, investor, economist, and professor.3

“Regardless of what the markets do, life goes on,” says Macan Nia, Senior Investment Strategist with Manulife Investments. Nia adds that every year there is some sort of drama that can really suck you in and take all your focus. Don’t act based on the drama; act based on the fundamentals.

“It’s really important to have the resolve to take a step back, look at the bigger picture and remind yourself that ‘this too shall pass,’” says Nia.

Eggs and courage

And finally, going back to the basics of a good investment strategy is always a great idea – reminding your clients of the power of diversification. “We’ve all heard the saying, don’t put all your eggs in one basket,” says Petursson. “Having a range of investments is key to weathering unpredictable markets.”

Having the courage to stay the course and believe in your investment strategy is important, and we go to basketball superstar Michael Jordan for inspiration.

“I can accept failure. Everyone fails at something. But I can’t accept not trying.” – Michael Jordan4

“It’s human nature to shy away and not try again if you’ve come up against adversity,” says Nia. “But consider that Michael Jordan didn’t even make his high school basketball team; he persevered and went on to become one of the great players of all time.”

None of us know how the remainder of 2019 will play out – markets may go up and they may go down – but the confident advice that your clients receive can greatly help to maintain calm. Get started now on your action plan for proactively communicating to your business base, and considering what investing fundamentals you can convey.