As a financial adviser, it's understood that market volatility is a sign of a normal and healthy market. Volatility refers to when the price or value of an individual stock or the overall market makes large swings in either an upward or downward movement. However, it can be a tricky subject to address to clients, especially when their investments are on the line.
Since the beginning of the pandemic, the market has experienced unprecedented levels of volatility. Yet, it's the perfect time to offer clients a long-term perspective on their investments to help them better understand their overall financial goals.
If you can help them find comfort and conviction in their investments, it's less likely that they will reach a stage of panic before returns come to fruition.
Put things into perspective and avoid tunnel vision
Your first clear action is to help your clients understand that market volatility is a perfectly normal and healthy behaviour. It's not unusual, and the market has always recovered from even the worst crashes such as the Great Recession from 2007 to 2009.
Clients or investors should be pre-empted that, despite the grim outlook of the market, making decisions based on emotions can be even more costly. Let your clients know that the only way to ride this out is by holding their impulses and allowing it to run its course.
Goal funding analysis
Most people make investments to achieve personal goals. Showing your clients a well-planned goal funding analysis will allow them to see that they are still on track with their goals despite market fluctuations.
Even when projections seem far off, there are always corrective actions you can take to adjust their goal funding analysis to ensure they reach as close to their goals as possible by the end of the current market downturn.
End-of-analysis metrics
For clients who want to plan for their retirement or legacy, end-of-analysis metrics can help them discover and understand how their investment plans are playing out.
This will also help identify the possibility of these plans not performing as well as they should, and you can use corrective investment measures to restructure those plans. Being able to manage your client's expectations is key to successfully restructuring their investment plans, as well as keeping their trust.
Stay invested
One last point to put your clients at ease when it comes to volatility is to remind them that the mindset of the investors is the representation of the market. Recovery will be quick if investors are optimistic and remain invested. If panic mode ensues, it's likely investors will also lose a lot of money in the process.
More often than not, fear overtakes logic in the minds of investors during a bear market. They would generally go into panic mode when they are not properly informed of the ins and outs of the financial markets. One of the main responsibilities of a financial adviser is to educate our clients on fluctuating markets and volatility; to reassure them that this is a storm you can weather together with them.
As you can see, volatility isn't so much a sensitive topic to address with your clients. At KWO, our seasoned financial advisers are always ready to help you find your feet in this industry. For more tips and opportunities to expand your career, join us today!