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In Praise of Good Financial Advisers (You Know Who You Are)

Ours is an industry that gets a hefty dose of negative publicity. True, there are scoundrels perpetrating Ponzi schemes and conducting other nefarious activities—and they cast a pall over the public’s perception of the well-meaning and competent financial professionals out there.

The good news is, these bad guys are few and far between. The bad news is, with our heavily regulated industry, sometimes the good guys may feel they are being micromanaged as a result. Still, there are so many financial advisers out there who are doing excellent work for their clients.

The Well-Adjusted Retiree
I recently had the opportunity to see this excellent work firsthand when I attended a client event hosted by an ensemble practice. At the event, a panel of recently retired individuals and couples answered questions from an audience of pre-retirees. The questions varied from cash flow, social security, Medicare and investment performance to how to align a couple’s “vision” of retirement, which included things like whether to downsize their home and how to stay connected and social with friends and family.

I was especially curious how the panel would respond when an audience member asked if the peaks and valleys of the market affected the panel’s daily decisions about drawing down on their nest egg. This question was especially timely, as the market had just dropped more than 870 points in the prior week due to the Brexit vote. The response? Daily markets weren’t a showstopper. In general, the panelists said:

  • They had their goals.
  • They had their nest egg.
  • They didn’t pay much attention to the markets unless their advisers said they should.

One couple talked about how they met with their financial adviser, estate attorney and CPA for an annual meeting. That meeting gave them the confidence that not only were their investments on solid ground despite market volatility, but that tax efficiency and an integrated estate plan were being managed by a team of professionals working together to help them achieve their retirement goals.

Helping Clients Not Sweat the Small Stuff
Financial advisers enjoy deep, meaningful relationships with their clients. Sometimes they garner appreciation and recognition for what they do. But just in case you haven’t gotten a dose of it lately, as one of the good guys in the industry, know that because of your competence and caring, your clients don’t need to sweat the small stuff like daily market volatility. Instead, they can focus on enjoying the retirement lifestyle you helped them achieve.

Thank you for all you do, financial advisers!

Joni Youngwirth_2014 for web

 

Joni Youngwirth
Managing Principal of Practice Management
Commonwealth Financial Network
Waltham, Mass.


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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.