The number of clients voicing concerns about markets falling has risen in recent weeks due to the actions of US President Donald Trump, leaving financial advisers to reassure clients their long-term plans are built to factor in this type of market volatility.
President Trump’s tariff announcements are a primary reason for the market downturn and the consequent client concern. In February, Trump announced a 25 per cent tariff on imports from Canada and Mexico, which took effect on 4 March, as well as the addition of a 10 per cent tariff on imports from China.
Already in effect is a 25 per cent tariff on all steel and aluminium imports, which affects Australia and has directly impacted markets.
On 2 April, the US President is expected to reveal the next tariffs on its trade partners, with Australia likely facing a potential lower tariff of 2 per cent to 8 per cent.
Data from super fund research and ratings provider Chant West revealed a small pullback in February with the median growth super fund down 0.9 per cent, in response to concerns around the impact of the tariff announcements and general weaker US economic data.
Financial adviser Andrew Saikal-Skea tells Professional Planner he has received multiple calls from clients in response to the markets falling because of the US President’s announcements.
“Some of these concerns have been in relation to their specific funds and some have just been responding to the news reports about markets, which is always quite dramatic,” Saikal-Skea says.
Conversations with worried clients must be handled differently as the US President is a very controversial figure. Saikal-Skea says he recommends to his clients “not to get consumed by the noise because it’s easy to fall into a trap”.
“With Trump, you really never know what he’s going to do next so you need to have a solid plan that can withstand the turbulence,” Saikal-Skea says.
He says the key to judging the markets right now is to ensure clients’ asset allocation is set up to either weather the storm or take advantage of it.
“If clients have sufficient allocation to defensive assets, then they have already been prepared in a way that allows them to keep calm and navigate this period of volatility (or further falls) without harming their long-term position,” Saikal-Skea says.
“Generally speaking, global stock market returns have been particularly high over the last few years. After a strong run like this, investors are often on edge, waiting for negative news.”
Saikal-Skea says while the tariffs are certainly concerning for global trade and diplomatic relations, the extent to which they hurt companies and markets is more uncertain, which is comforting for worried clients to hear.
He says during the markets’ good periods, he keeps clients aware of what he is doing to prepare for potential bad times and market volatility.
New normal
Global geopolitics expert Stephen Kotkin told the Fiduciary Investors Symposium, hosted by Professional Planner sister publication Top1000funds.com, that Trump’s presidency, while chaotic, may actually be an “unwitting” instrument of necessary change and should not be feared.
Kotkin argued there was “a lot to be optimistic about in this insanity of Trump and chaos and unpleasantness” and said while it was hard to understand, the world would come out the other side.
Wealth Planning Partners director Amanda Cassar says while market volatility is inevitable and “nothing new”, some clients believe this is a different scenario because of Trump.
Market falls are “always touchy, always feels new, always feels like we haven’t had this particular catalyst before”.
Cassar says because market changes feel different every time that can be “unsettling” but she advises clients to stick to the long-term plan as the possibility of market volatility is built in.
“We do have a long-term plan in place, we don’t do knee jerk alterations to portfolios every time there’s a hiccup,” Cassar says.
“We help them stay on the course and look at the long-term plan for the portfolios.”
Like Sakai-Skea, Cassar prepares clients for the possibility of market volatility from the beginning. She says they have an education program for clients when they sign up as part of their initial process.
However, Cassar says often holding for the longer term will give clients a better outcome. “Time in the market is usually better than timing the market,” she says.
Swings and rollercoasters
Statewide Advice financial adviser Paul Wratten says no clients have actively reached out to discuss the decline in market values but they have been proactively making calls to talk about any concerns.
Wratten expects market volatility as a result of Trump’s presidency and says the questions are around “how big the swings will be and over what timeframe”.
“Although they are quiet now, clients might eventually get sick of this rollercoaster ride,” Wratten says.
“We will need to be proactive in how we respond to their concerns, and how we manage their portfolios.”
Similarly to Cassar, Wratten’s focus is educating clients to prepare them for inevitable periods of market volatility, whatever the catalyst, and in turn manage any fear that will arise.
“We worked hard to educate clients on the importance of both a diverse asset allocation and an appropriate selection of investments,” Wratten says.
Wratten encourages advisers with concerned clients to “get on the phones” and talk to them personally as this market downturn is attributed to an obvious cause.
“Conversing directly with clients will allow us to explore and resolve concerns more directly than broad comms like a market bulletin or newsletter,” Wratten says.
Counterpoint Advisory Services financial adviser Digby Hurst also emphasises the importance of speaking directly to clients who express concern, such as through technology including Microsoft Teams or face-to-face meetings, as advisers can pick up on client body language.
Hurst says he has received queries from clients approaching retirement, while younger clients see market volatility as an opportunity.
To assuage the worried clients, he ensures “clients understand the issues driving the markets” when communicating with them.
For example, Hurst says “using long-term returns charts, which include previous periods of negative returns, is an effective way to provide perspective.”
