Market dive puts advisers on the offensive

Market dive puts advisers on the offensive
Beyond just hand-holding, they provide clients with perspective and advise them to buy low
FEB 28, 2020

The sudden and severe stock market correction that is now being compared to the worst days of the 2008 financial crisis is forcing financial advisers to move beyond the boilerplate replies to nervous clients to, “Just relax. You’re investing for the long term.”

“I’ve been reminding clients that when everyone else is scared, this is our cue to be bold, so I’m making calls to clients with money on the sidelines to invest that money now,” said Laurie Allen, owner of LA Wealth Management.

While Ms. Allen is trying to get her clients to focus on the buying opportunity in a stock market that has dropped 14% from its peak last Thursday, she said she is seeing an unexpected level of fear from her younger clients.

“I’m hearing from clients, but not the ones you would think,” she said. “I’m not hearing from people close to retirement, most of the fear is coming from younger clients who have built up some wealth these last couple of years in the market.”

As the global financial markets have been pulling back in stride with the spread of the fast-moving coronavirus, advisers are scrambling to help clients keep things in perspective.

“You only need to go back 14 months to recall the 20% correction that came and went,” said Tim Holsworth, president of AHP Financial Services.

Even though medical science is still racing to catch up with the causes and treatments for the coronavirus, Mr. Holsworth is taking some solace in the idea that the market’s reaction is not based on traditional fundamentals.

“Overall, this pullback is a little different because most people believe the economy is in good shape and the fundamentals are good, and it’s not hard for them to buy into the idea that this sell-off is completely overblown,” he said. “So far it’s been pretty easy to talk with clients and ask if they think we’re really all going to die of the flu.”

But because common sense can fly out the window after seven straight days of stock market declines, some advisers are embracing a proactive approach to head off client inquiries.

“We pride ourselves in being proactive in these types of situations,” said Derek Eichelberger, director of investment strategy at Schneider Downs Wealth Management Advisors.

Mr. Eichelberger categorizes the inbound client calls he's getting as viewing the pullback as an overreaction, a concern that doesn't warrant major portfolio changes or a dire reason to sell off everything.

“People who are scared want to sell now because they’re worried, and then they want to sit on sidelines until they’re more comfortable,” he said. “That’s a strategy that sounds good but in actuality never works, because in order for it to work you’ve got to sell now and buy in at a lower level when things actually feel worse.”

To help clients keep things in perspective, Mr. Eichelberger is reminding clients of the likely economic impact.

“The coronavirus has the potential to shut factories down and have a negative economic impact, but it’s still a virus,” he said. “We’re looking at a likely scenario where we’ll probably see the economic impact over the next four or five months. We’re trying to give clients perspective that this has the potential to impact the short-term pricing of their investments.”

And short term is really what this current market reaction is all about, which is the message being delivered by Charles Failla, principal at Sovereign Financial Group.

He helps clients keep things in perspective by separating portfolios into three primary buckets: one- to five-year assets, six- to 10-year assets, and 10-year-plus assets.

“I tell clients in every review that when we see a correction, you’ll see the portfolio tagged for 10-year-plus will go down, and we’re going to add to that bucket,” he said, adding that clients need to be reminded of the benefits of buying stocks during a downturn.

“The only time I think I have an easy decision is when the market is down 15% or 20%,” he said.

Latest News

The power of cultivating personal connections
The power of cultivating personal connections

Relationships are key to our business but advisors are often slow to engage in specific activities designed to foster them.

A variety of succession options
A variety of succession options

Whichever path you go down, act now while you're still in control.

'I’ll never recommend bitcoin,' advisor insists
'I’ll never recommend bitcoin,' advisor insists

Pro-bitcoin professionals, however, say the cryptocurrency has ushered in change.

LPL raises target for advisors’ bonuses for first time in a decade
LPL raises target for advisors’ bonuses for first time in a decade

“LPL has evolved significantly over the last decade and still wants to scale up,” says one industry executive.

What do older Americans have to say about long-term care?
What do older Americans have to say about long-term care?

Survey findings from the Nationwide Retirement Institute offers pearls of planning wisdom from 60- to 65-year-olds, as well as insights into concerns.

SPONSORED The future of prospecting: Say goodbye to cold calls and hello to smart connections

Streamline your outreach with Aidentified's AI-driven solutions

SPONSORED A bumpy start to autumn but more positives ahead

This season’s market volatility: Positioning for rate relief, income growth and the AI rebound