Client relationships are the bread and butter of the advising world. While it’s easier to maintain positive client relationships when markets are up, it’s more important than ever to maintain those relationships during a down market.
There’s no way around it – 2022 has been a rough year for investors and advisors alike. With many investments sitting at a loss, clients are turning to their advisors for answers. Will I recoup this money? When will the markets improve? How will this affect my goals?
You may not have all the answers they’re looking for, but it’s still critical to engage in these conversations and leave your clients with a positive perspective moving forward.
How to Talk to Your Clients in a Down Market
As a financial professional, you’re probably familiar with market volatility. And although a down market might not send you or your team into a panic, your clients likely have their concerns.
Here are five tips you can use to quell those fears and communicate your value to clients during rough market waters.
1. Be Proactive
One of the best ways to start the conversation is to reach out to your clients before they start calling you. This shows clients that you’re paying attention and aware of their concerns.
Consider sending out an email with general information and an invitation for clients to meet with you in-person to discuss their portfolio. If there are a few clients that might need more attention, a phone call could also help ease their worries.
2. Show Them the Data
You can use this opportunity to show data on down markets in general. Although past performance doesn’t predict the future, that data does offer reassurance that every single down market has recovered – with the average bear market lasting about 289 days – that’s less than ten months.
Some other interesting figures you can share:
- The average stock loses 36% during a bear market.
- There have been 26 bear markets in the S&P 500 index since 1928 – and 27 bull markets.
- The last bear market (prior to 2022) occurred at the start of the Covid-19 pandemic in 2020, and rebounded in about a month.
The more you (and your clients) know!
3. Be Empathetic
A large part of advising is being a good listener for clients. They tell you their long-term goals, financial challenges and life hurdles. Although you may not spend much time with each client every week, they likely trust you as their guide through financial troubles like down markets.
It’s best to offer empathy and a listening ear during these times. Give clients the opportunity to voice their concerns and let them know that you hear them.
4. Review Their Plan
Sometimes clients want to see you walk the walk rather than just talk the talk. If that’s the case, it’s a good time to bring out their numbers and review their overall plan.
If you can show them how the original plan you built together still works, despite market behavior, you can help put clients back in a goal-focused mindset and help them ignore current trends.
5. Reassess Their Risk Tolerance
A bear market can act as a true test of risk tolerance.
If a plan review and conversations still aren’t calming your client’s fears, it may be a sign to adjust their risk tolerance. If market volatility causes them a lot of stress and worry, perhaps they should be investing more conservatively than you originally planned.
While a down market may not be the time to make major changes to their portfolio, you can still kick off those conversations.
Down markets can lead to tough client conversations. With these five tips in mind, you can help your clients gain perspective and move forward with confidence.
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