By W.J. ROSSI
Consistency is key for clients’ portfolios – the best thing they can do for their assets and retirement is invest regularly and let time smooth out financial ups and downs. Understandably, our clients do not always take this approach. We all hear about market swings, political developments and use of economic tools like tariffs in real time, and the shock or unease of these events can pull clients off-track. In a world of distractions and tumultuous markets, we must keep clients focused on the long-term and discourage hasty decision-making in the near-term to ensure their portfolios are secure.
Eyes On The Prize
To maintain clients’ focus, validate their anxieties. All but our youngest clients will remember the financial and emotional impact of the Great Recession – and while the top 20 percent of Americans have collectively more than recuperated their losses, the average American family still hasn’t recovered from the loss of one third of its net worth. An MDRT survey found 46 percent of consumers would make portfolio adjustments if they thought a declining market trend would continue, so we should expect clients to want changes when markets plummet or turn volatile, as occurred in August.
Clients can panic if they see saving for retirement as a process where time is something they constantly lose, and don’t treat recessions as inevitable events that are pre-planned for in a normal retirement-savings track. Such a stance can be emotionally reinforced by factually correct statements like “you shouldn’t let your 20s go by without investing,” or “putting off saving until you have more spare income is a bad idea.” Clients need reminders that portfolios gain time in the retirement-savings process, and that one asset of time is smoothing out expected effects of expected downturns.
Clients will also have reasonable fears about government policy, as decisions on taxes, healthcare, education and more can all have direct financial impacts. Predictably, these concerns - and hopes - tend to heat up during presidential election years, and some clients will want significant portfolio changes after elections. Reinforce the importance of consulting with you before making these decisions, and remind them that their portfolios will also outlast the presidents and policies clients want to react to.
To preclude events from throwing clients off-balance, pre-emptively share occurrences that necessitate changes to your clients’ portfolios, and some that don’t. In these alerts, go over your action plan to reorient assets to prevent unnecessary worry and demonstrate you have your clients’ back. Putting these briefs in a video format can make them more engaging and personal, since you would be right in front of your clients on screen and they can draw reassurance from hearing your voice. Newsletters, emails and social media posts can also be used to share important updates.
Consider sharing a wider array of perspectives from other industry professionals and/or consumers with clients who need an extra degree of support. A broad spectrum of views will help you avoid looking like you’re arguing with nervous clients, and help add context to situations beyond single articles or clickbait headlines. For example, clients might have heard that bond yield inversions often signal oncoming recessions, but they may have missed the articles pointing out that those recessions may not arrive for over a year.
Clients who allow news-related anxiety to make decisions for them can seriously damage their portfolios and set themselves back. By maintaining commitment to their long-term plans during moments of fear, and helping them manage their nerves, we can help keep them financially secure no matter the state of the world around them.
W.J. Rossi, CFP, ChFC, is a 16-year and Lifetime MDRT member and a former president of the MDRT Top of the Table. He is a partner at Koss Olinger and began his financial services career there in 1997, and also sits on the firm’s Investment Advisory Committee. W.J. has lived in Gainesville, Florida, since 1987.