Financial advisers maintaining a confident demeanour with clients is essential when the market experiences a downturn.
Wealth Investors director Chris Youssef tells Professional Planner that “confidence as an adviser plays a pivotal role” in reassuring clients.
“If you believe in the underlying investments and the strategy you’ve put in place, that confidence will resonate with your clients,” he says.
He emphasised that clients will sense the demeanour of their advisers and it will affect whether they become anxious or remain calm.
“If you’re unsure or panicking, clients will pick up on that and their anxiety will only increase.”
Youssef says adviser confidence must be backed up with charts and data to effectively reassure clients. Advisers must be able to deliver “clear, confident explanations that resonate.”
He explained that his firm does this by relating everything back to their objectives using “live cash flow modelling.”
“This shows them how their portfolios are designed to handle volatility, with defensive holdings in place to protect them.”
However, it may be unrealistic for some advisers to be able to speak to so many clients immediately after a market downturn.
While Strategy First adviser Chris Gilmour echoes the sentiment that advisers need to exude confidence with their worried clients, he says that it is challenging to call every client immediately.
To tackle this he recommended group communications, such as a video, as you can reach many more clients faster.
“Your clients can hear the calm in your voice and the reassurance that volatility is normal and part of the journey. They know you’re on top of this and thinking of them.”
Gilmour says that his firm reminds clients that their needs are being met and “their portfolio design gives them time for markets to recover.”
He asserts that confidence is an important skill for advisers to have when markets become unreliable or take a dive.
“We know the impact of a single bad decision can turn a strong financial position, built around realistic objectives and flexibility, into a situation where sacrifices need to be made.”
Preparing clients in advance for potential market downturns is paramount for advisers to handle clients panic.
Shadforth principal wealth adviser Alister McCrae emphasises that advisers must communicate about potential market dives before they happen.
“Rather than trying to predict markets, we build an understanding among our clients of what they are doing and why,” McCrae says.
“We educate them on what their financial journey will be like so that when they experience the inevitable disruptions along the way, they feel informed rather than alarmed.”
Pitcher Partners wealth managing director Charlie Viola says that his firm prepares for periods of weakness by both educating clients about their assets and ensuring that they “always have some powder dry.”
“We deal with the movements in markets by the way we structure portfolios and the asset quality.”
Viola says that when market downturns happen, they “refer back to the reasons why we can structure portfolios the way we do in terms of diversity and asset quality but also keeping some powder dry.”
Gilmour also references the importance of addressing the possibility of a market downturn. This involves “setting expectations around what it means to invest in volatile asset classes and, crucially, explaining what our plan will be in the event of a significant downturn.”
Yousef concurs that preparation is key to handling clients during these periods of uncertainty and explains that his firm regularly reminds clients that the markets can change at any time.
“During the good times, I emphasise the importance of understanding that markets are not linear and there will be ups and downs. By educating clients early, they’re less likely to react emotionally when things get rough.”
