In a 24/7 news cycle, anything can change in a heartbeat. When it comes to clients and their assets, fears about such change can be fast and intense. Nowhere is this more evident than in Washington D.C., where the daily headlines and deliberations over economy-shifting bills can swing sentiment, if not markets, like an unlocked gate in a storm.
If your clients are overly focused on 24/7 newscasts or war stories from their friends and families, what they might not realize, says Brian Levitt, Senior Investment Strategist at OppenheimerFunds, is that staying in for the long haul can remain a sound strategy. Gravity might dictate that what goes up must come down, but markets are not mean reverting, if something goes down, it is inclined to go up again eventually. The message for clients? Put down the remote, hang tight and ride the storm – and they can usually even reap benefits along the way.
Discussing hot-button topics with clients can feel complicated at first glance. But Levitt says advisors have history on their side. For starters, equities have a habit of going up. Going back to the 1920s, they’ve tended to go up 95 to 99 percent of the time over any rolling monthly 10 year or 15 year period, according to Levitt. This is even while markets correct every single year.
One way advisors can thwart correction-worry is by asking pointed questions about their clients’ time horizons. Learning whether they are concerned about the next six or 12 months, versus the next 10 to 15 years, can be helpful in diffusing client concerns. As it turns out, apart from 1995, the market has endured a greater than five percent correction each of the last thirty-seven years. And as Levitt points out, if clients, “are worried about a market correction, remember, in all but [about] eight or nine of those years, equity markets finished in positive territory.”
Even so, it’s impossible to go anywhere without hearing whispering that the current political climate could “make or break” the market. For Rick Kahler, president of Rapid City, SD-based Kahler Financial Group, politics presents another way to reassure investors about why long-term strategies are a solid bet.
Noting that healthcare and tax codes don’t matter in the long run where portfolios are concerned, Kahler says as long as cooler heads prevail, a long-term strategy can “out-win” any 24-hour news cycle, “Look at the Comey [hearings], for instance. A long-term investor doesn’t care what is said or if there was a crime or not,” he says in an interview with FA-IQ. “Sensationalism in news tries to tie great importance to short term events that have no influence on long-term events.”
Human nature dictates that from time-to-time, even the coolest of the cool get triggered. And when that happens, Monica Sipes of Exencial Wealth Advisors in Frisco, TX, turns to her toolkit. Cooling frazzled nerves can involve reminding clients about why they have chosen the stocks and bonds they are committed to and what type of performance they need to meet their goals.
“Emerging markets were a frustrating place to be from 2013 through the first half of 2016. But, I kept reminding [my clients] of the valuations and that we would eventually see a return with a premium attached,” says Sipes. “We are finally starting to see that happen in the last bit of 2016 and for 2017. I make sure to point this out and explain that because of their patience and discipline they have earned this premium and will continue to do so over time.”
While you might not be able to head off client woes one hundred percent, your frank conversations and willingness to work with clients are sure to come in handy when the caller on the other end of the line is a jittery investor.
If clients want to get out in the end, Levitt has one more tip for the conversation: remind clients that once things are on the rise, getting back in is “among the hardest things to do.”
“Investors that missed the best 30 days in the market get negative returns and that's over a 30-year time period. Just 30 days,” he says. “It’s difficult to get back on a plan when it’s been broken. Have a plan and stick to it – be consistent with that plan.”