Not a week goes by without news reports reminding us of the financial risks in our banking system and the impact of market volatility on retirement plans. As pre-retirees brace themselves for the next round of rough air, financial advisors should embrace — or recommit to embracing — a personalized approach that evolves with the times but which can withstand all phases of the financial cycle. Whether an advisor is just starting out or is an industry veteran, they stand a greater chance of building long-lasting relationships with clients when they take the following steps to support a financial plan.
Pick up the phone. Send an email
With investors worrying about whether the floor could still fall out of the market, advisors should step up their relationship-building. Virtual hand holding, whether electronically or via phone reassures clients and helps them stay on track to realize their financial goals while reinforcing trust in the relationship.
Amid the onset of the pandemic in 2020, reaching out to clients and prospects helped my practice grow. Two years later, stock market volatility was still the most common reason clients reached out to planners, according to many advisors in a
In strong and weak markets alike, planning should not feel like a rollercoaster ride. Have at least one conversation with clients about separating their emotions from the investing process before, or early in the cycle of, market upswings and downswings. Disciplined investing is equally relevant to bull and bear markets.
Revisit the plan with changing times
Planning occurs in stages. Whether the client is in their accumulation phase, distribution phase or their final legacy stage, it's important to adjust investments based on the client's planning lifecycle and market environment. Being a high-touch advisor has been beneficial in engaging the client as they cycle through phases. Again, pick up the phone on birthdays or just to check in to see whether they've made any changes to their personal balance sheet. They may have purchased a house or sold their home. You never know.
Let uncertainty be your guide
Even with all the (as yet unrealized) predictions of recession amid Fed rate hikes, consumer spending currently remains strong, as does employment. With no clear answers on the horizon, advisors should use ongoing uncertainty as a stepping stone to sharpening evergreen financial goals, goals that withstand the stress of lackluster portfolio performance in a tough market cycle and help investors see past performance.
This means never starting with portfolio performance — something I learned in my career.
Since each phase of the market cycle presents challenges and opportunities, staying nimble, flexible and fully diversified is key to building a sustainable practice. The process of setting financial goals with a client and deciding how to work toward them can seem like a formidable challenge when faced with an uncertain future. Placing the planning process at the center of the advisor-client relationship, by contrast, can help a client work through the unknown.
The planning process during a sustained bear market rally, for example, is an opportunity to work with clients to take short-term profits in some positions within a flexible strategy. Staying fully diversified across value and growth stocks may help, especially when even conservative approaches, such as bond investing, lead to the losses as we witnessed in 2022. While diversification does not ensure a profit and may not protect against loss, it can play a key role in establishing a sound investment strategy and reducing risk.
The most pivotal decisions financial advisors can make as they grow their business revolve around their knowledge of market cycles and their adaptability to changing conditions. While economic factors affect investments on a global scale, each client, their goals and aspirations, are unique; the constant is that their objectives need to be met over a longer time horizon. Committing to managing the relationship with flexibility and personal goals in mind instills trust and sets the client's plan on a course that can weather almost any storm.
