This year, the stock market has seen large upward and downward shifts. On Monday, August 5, 2019, the stock market reported the worst trading day of the year. This downward shift has some investors worried that another recession could be just around the corner. Other investors see this as a chance to invest in the market. These emotional responses from investors could cause them to react and make drastic changes to their accounts.
Working with clients during these emotional times of market stress could make or break relationships. Emotions can lead clients to make rash and sometimes ill-considered decisions. Through these periods of market volatility, advisors should meet with their clients to review their overall financial situation. During these meetings, it is the financial advisor’s goal to communicate frankly about market volatility and help clients reconsider their tolerance for risk. These meetings can strengthen the client-advisor relationship and help clients see that, while they cannot control the financial markets, they can, with the advisor’s guidance, control their financial plan.
While some investors may seem to worry more than others, regular communication with all clients will help the advisor know what strategies to employ during volatile market times. Asking thoughtful questions to a client about past financial decisions can help determine where the investor’s focus lies. In short, market volatility is bound to happen. By meeting and communicating regularly with clients, advisors could be able to minimize the stress created by the volatility and, in turn, build longer and more resilient client relationships.
SFA Advisor and Managing Partner of Capital Insight Group, Andrew Crane shares his insights with WSB TV on the market events of August 5, 2019, and why it is important to remove emotional reactions when there are large stock market shifts. View the segment here.
Capital Insight Group is not otherwise affiliated with SFA.