Be Proactive in a Reactive Environment

Has the recent stock market volatility got you feeling like you are on an emotional roller coaster ride? One day headlines read, “After Historic 1,000 Point Plunge, Dow Dives 588 Points at Close,” and the next day they read, “Dow Roars back, Rallies 620 Points!”

If you find yourself caught between the media hype and hysteria wondering what you should think or expect next don’t wait for the market to dictate your actions, instead do what other successful advisers are doing and start being proactive in a reactive environment.

1.) Be Proactive with Your Knowledge
We’ve all heard the saying, “Knowledge is power,” and no truer words can be spoken when it comes to understanding a volatile stock market. Your clients look to you to know what is happening and why. In times like these, it is important to not only research the facts (and myths) but to keep current on them at all times. Take time to educate yourself and then your clients.

2.) Be Proactive with Preparing the Story
Knowing what is happening and knowing how to translate that to your clients are two very different things. That is why it is so important to have a process for explaining what the current market story is.

Over the years, I’ve created many practice management tools for financial advisers and insurance agents. One of the best tools that you can use, especially now, is what I call “The 60 Second Market Story.” It is a process for mapping the past, present and possible future outcomes of the stock market. If you can explain to your clients what has happened since the beginning of the year, what is currently happening, what your analysts are predicting may happen in the short-term, and do it utilizing a story format that your clients can comprehend—without all the industry jargon—you are doing more for them than a majority of your colleagues and peers.

3.) Be Proactive with the Client Calling Process
Once you have prepared what it is you want to share with your clients, it is important to know who exactly to share it with. Take time to create a list of your clients to call. The initial calls should be to clients who may be most concerned about the market, but you should also plan to contact each of your clients. Then, block off a specific time each day to make those calls. Be sure to tell them not to panic if the volatility continues, as it is an expected part of the stock market cycle.

Why it Works and What to Expect
Most clients know that market volatility is not your fault but you do need to remember that client communication is your responsibility. This will help mitigate your client’s natural fears by assuring them that you are staying in touch with them, sharing your expertise with what is going on with the market. The reason that this process works is because clients will appreciate that you understand their concerns and. Remember: an adviser who cares creates loyal clients!

If you read this blog and need help mapping out your “60 Second Market Story,” email Melissa Denham, director of client servicing at melissa@advisorsolutionsinc.com for our complimentary white paper on this topic.

Dan FinleyDaniel C. Finley
Advisor Solutions
St. Paul, Minn.

Editor’s Note: For a related webinar titled, “Behaviorally Smart Client Engagement,” click here. CFP CE credit is available for this webinar.

To have discussions with your colleagues who are also trying to communicate successfully with their clients during this recent market correction, visit FPA Connect’s “Market Volatility and Financial Planning” forum.

For more information on on FPA Connect, Knowledge Circles, CE, or any other resource that could help you at this time, visit our Professional Development Center. 

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Everybody Calm Down: 4 Tips to Navigate the Market Correction

This hasn’t been the best week for investors. Many of you probably got calls from scared or frustrated clients wanting to do irrational things—like sell stocks—to make themselves feel better.

And fielding these calls might not be easy, but we’ve got four steps for you to help you navigate the market correction and comfort your clients.

No. 1: Make Sure Clients Don’t Panic, Don’t Flee
It’s our natural instinct to want to flee a painful or uncomfortable situation and while that may work in life, it doesn’t work in the stock market.

Steve Sanduski, president of Belay Advisor in Mequon, Wisconsin, told U.S. News that the biggest mistake investors can make is fleeing the market at the wrong time.

“We know getting panicky and selling after stocks have already nosedived is a pretty lousy investment strategy, but investors do it anyway,” said David Greene, host of NPR’s Morning Edition.

And many investors did that, said Nigel Green, CEO of deVere Group. “The sell-offs were considerable on so-called ‘Black Monday,’ and the volatility continued in Tuesday’s and Wednesday’s trading,” Green said in a news release.

Boulder, Colo.-based adviser Trent Porter told NPR he’d advised this to his clients: that the stock market is like a roller coaster, “The only time you get hurt in the stock market…is when you get out,” while it’s still running and you’re still strapped in.

“Sometimes doing nothing makes more sense than throwing in the towel,” Brian Jacobsen, CFA, CFP, Ph.D., wrote in a Wells Fargo blog post.

But you, advisers, shouldn’t let your clients be those investors. In order to keep them from panicking, be empathetic, understanding, and (which leads us to our next tip), engage in active listening.

No. 2: Engage in Active Listening
Suppress the urge to launch into a monologue about the market and how it will be OK—let your client talk. Let them vent and say what they need to say. Chances are they’ll be upset and emotional, but once they have the opportunity to get it off their chest, you can swoop in and comfort them.

Psychologist Jack Singer, author of “The Financial Advisor’s Ultimate Stress Mastery Guide,” told Financial Planning that most likely clients aren’t going to be immediately reassured but active listening will help clients feel confident in the financial plan you’ve laid out for them.

“When you initiate active listening, you first just take a breath and just listen to the position of the client without judging it,” Singer told Financial Planning. Put yourselves in their position and say things like, “I understand you’re frightened that you may outlive your wealth because of the value today of your portfolio.”

When clients realize you’re on the same page and that you understand what they’re feeling, they’re open to objectively listening to you.

FPA published an article, “5 Steps to Calming Upset Clients,” that reinforced Singer’s conclusions. Author Barbara Kay noted the five steps are to listen, acknowledge, agree, add your perspective, and resolve.

“These five steps, employed with skillful diplomacy, build a foundation for resolution,” Kay wrote.

But note that if your client is still stuck in an emotionally charged state, it’s best to tell them you’re going to explore options for them while they take a little time to calm down.

No. 3: See the Opportunity
There’s always a silver lining.

With these reduced prices, there’s a buying opportunity, Scott Wren, senior equity strategist for Wells Fargo told Financial Planning.

“You should be buying the sectors that have been hit the worst,” Wren said he advised clients.

Plus, the Fed and the Bank of England are less likely to raise interest rates this year like they’d planned, Nigel Green said. When they do raise them, they’re likely to be more cautious.

“Fortunately the Fed and the Bank of England now have time to evaluate if an imminent interest rate rise is necessary,” Green said in a news release. “If the Chinese stock market had fallen after any interest rate rises, the fallout could have been much, much worse.”

No. 4: Be Comforted by History
We were overdue for a market correction, experts say.

“We have not seen a correction for a while,” Joe Davis, chief global economist at Vanguard told Financial Advisor Magazine. “If the catalyst had not been China, it would have been something else.”

Jacobsen wrote in the Wells Fargo blog post that historically for corrections since December 1949, the average gain is 47 percent (a median of 32.4 percent) and the average duration from trough to the next peak is 495 days (a median of 289 days). The first peak in this correction occurred on May 21, 2015, when the S&P 500 was at a high $2,130.82, and as of today (Aug. 27) we are 96 days into the correction zone.

Plus, Jacobsen said, advances are longer and more powerful than corrections.

“The current correction, I think, will rebound more quickly than 2011’s or 1953’s [corrections],” Jacobsen reassured readers. “Growth is more robust than market prices are suggesting.”

So just like you tell your clients not to panic, we tell you not to panic. As FPA members, you have many resources at your disposal to help you through this correction. Check out our Knowledge Circles, discuss the current market and how you’re handing it with clients on FPA Connect, and stay connected with your local chapter.

HeadshotAna Trujillo
Associate Editor
Journal of Financial Planning
Denver, Colo.