Preparing For the Worst
Anyone with any degree of tenure in financial services has likely weathered down markets. Today’s market environment is particularly precarious. With tariffs starting to impact prices and shifting geopolitical realities, even the surface-level apparent strength of the market seems illusionary.
As advisors, it is our job to prepare for the worst. The nature of markets and economies is not constant abundance and growth. There are fallow seasons, unexpected disasters, recessions, and depressions. These things will happen. The good news is that, over the long run, investments grow and portfolios become larger. However, this is cold comfort to clients who just watched their 401Ks get decimated by a popped bubble. The fact that bear markets happen will not be reassuring to someone tracking their portfolio in one.
How to Survive When Markets Turn South
Your clients trust you as the steward of their wealth. Here are some tips on what you can do to assuage their fears and manage their worry, should the worst occur.
- Know everything that could go wrong. Right now, the biggest concern many experts have is that AI is a bubble that could pop (source). Another concern is that the impact of tariffs is still uncertain (overview). Things that could go wrong won’t necessarily go wrong, but if you deeply understand them, then you can talk about the possibilities fluently with clients who might be concerned.
- Have turnkey solutions at the ready. Having a specific plan, even if not fully formed, for each potential market danger on the horizon can be a useful tool for calming client nerves.
- If the markets turn, be proactive with your client communication. Being ready to message and handle anxiety when disaster strikes will make your clients trust you more. Deploy newsletter, market insight videos, and thought leadership immediately.
- Trust your instincts. When unprecedented things happen, nobody knows what to do. Your training in this profession and innate talents have prepared you for moments like this. Trust them. Follow your instincts.
- Own your mistakes. It has become fashionable in society to blame others when things go wrong. You can actually earn trust by owning your own mistakes and talking about what you’ll do differently going forward. Clients, and really all people, are hungry for honesty and accountability.
As Always, Communication is Key
In financial services, we value smart, analytical, detached thinking. We understand bias and we can get quite wonky when it comes to portfolio construction ideas. These are all useful, admirable talents. But the so-called “soft skills” are equally important for RIAs to master. Being a good communicator who can listen to client concerns and respond with precision and emotional intelligence is every bit as important as grasping the nuances of market indicators and the broader macro. I’m proud of our firm’s client communication strategy. We even help other RIAs on this front, and would be happy to discuss how we can help you unlock the next tier of client communication excellence.
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