Guiding clients through turbulence

Marc A. Silverman, CFP, ChFC, has seen the share of managed money accounts in his practice grow steadily during the past four years, outpacing life insurance and disability investments for his more than 1,500 clients. As the steward for a rising number of portfolios, his firm might be the first phone call people with acute cases of loss aversion will make during an equity market downturn. So, how many phone calls has he fielded between January and May during the recent market volatility? Just three.

“I think a lot of that stems from the fact that we educate our clients about what to expect when there is volatility,” the 41-year MDRT member said. “It’s more setting those expectations in the beginning and not when the event happens.”

Julianne Hertel, CLU, ChFC, also did not get calls from clients wanting to bail out of the market. In early April, the 10-year MDRT member dispatched a couple of emails, reminding them about earlier conversations regarding expectations, diversification and playing the long game. 

“It was just a couple of bullet points about staying calm, don’t be reactionary and reminders of everything we talked about, including volatility, during those annual planning meetings,” Hertel said. “Several responses thanked me, and only one person wanted me to talk them through the volatility.”

No one can control market uncertainty, but advisors can reduce, or even prevent, the panic that clients feel as they see the value of their investments get whiplashed. The confusion can even create opportunity.

Annuities

Just as the COVID-19 pandemic shifted attitudes about buying life, critical illness and medical insurance coverages, the recent instability in stocks is rendering people more willing to consider guaranteed income products.

Pui Ka Lam did not sell many annuities during the previous two years. Clients, especially business owners, balked at the idea of an insurance company holding their money for many years before it matured when investing in the market or in their companies could produce higher returns.

“I see the difference this year because the market is so unstable,” the eight-year MDRT member said. “Now more of my clients value annuities. I’ve seen their perspective shift from being a risk taker to appreciating that, regardless of what the market does, the annuity will give them guaranteed money they can use for their retirement or for their children’s education.”

One of her clients, a restaurant owner, wants to give her 5-year-old daughter a substantial sum of money when the daughter marries and starts a family. 

“I asked her, ‘Could you guarantee that your business will provide the money you want to give to your daughter to start her life in 20 years?’” Lam said. “She said, ‘I do not know, the market is very unstable.’ So I said, ’Then why don’t I help you build something with this annuity so, regardless of the market or geopolitics, that money will be there for your daughter?’ She bought the annuity. She realized she can’t guarantee her businesses’ success, but she can guarantee that she can give her daughter this gift when she turns 25.”

When Lam sets expectations during initial client meetings, she always explains the difference between investment and insurance: One is to grow your money; the other protects what you can’t afford to lose. However, the current volatility seems to be making that distinction clearer, particularly for clients who thought investments alone would protect their families. 

During the first quarter of 2025, she called five to eight clients a day, starting with her high-net-worth individuals, to update them. Some of those conversations turned into upsell opportunities. One client had split his portfolio between equities and insurance. Lam explained that his stock investment is vulnerable to the market and could shrink, whereas insurance would still protect his family. He thereupon doubled his insurance coverage.

Discomfort is part of the process

The human psyche is wired more so for avoiding harm than with recognizing an opportunity. That’s why the urge to flee a slumping market is typically stronger than the desire to stay. But if clients understand that discomfort is part of the process of being an equity investor, then volatility won’t chase them away, said Richard Dobson Jr., CFP.

The 23-year MDRT member isn’t getting inundated with client calls, but the few who do are saying, “Tell me again why I shouldn’t be concerned.” So, he revisits those early conversations when he aligned their expectations with reality. He’ll mention Jeremy Siegel, financial professor emeritus from the Wharton School of the University of Pennsylvania, whose book “Stocks for the Long Run” analyzed large company stocks in North America since 1802 and found that large-cap stocks returned 6.5% to 7% on average per year after inflation over the last 200 years. So, a dollar put in the stock market in 1802 would have appreciated to more than $700,000 by the end of 2012.

In addition to graphs and statistics to convey that market swings are normal, Dobson explains that “on average” means that returns are higher half the time and lower the other half. It’s like holding a hot potato in one hand and a chunk of ice in the other.

“On average, you should be fine, however, you are not comfortable,” Dobson said. “They need to hear you say that discomfort is part of the process, so when they are, they will recall that this is exactly what you said would happen.”

He’ll even take clients back to the last market downturn to show how their portfolio rebounded since then.

“No dip has ever been permanent in the history of the stock market,” Dobson said, adding that deluging clients with empirical data during a period of upheaval when their thinking is leaning toward emotional rather than rational is not always the best approach. “Clients want to be reassured, and many times the demeanor and actions of the advisor are super critical. Ups and downs happen every day, but over the long term, the market goes in one direction and that is up. We need to click on the high beams and look further down the road during the dips, and clients can find comfort in Siegel’s important study.”

Rational vs. emotional

Part of the onboarding process for Tristan Hartey, Dip FA, BA (Hons), an 11-year MDRT member, is getting clients to understand that they need to remove emotion from matters about money.

“We ask our clients what drives their investing. Is it fear of missing out, overconfidence or fear of loss, and what are they afraid of losing?” Hartey said. “Knowing which one they are focused on helps us tailor communication with them, so they can stick to the process.”

Silverman also advocates for the long-term stability of equities during his onboarding process using such sources as a chart from the American Funds Group that shows the upward trajectory of the S&P 500 since 1933 and through words of wisdom from investing sages like Warren Buffett — “My favorite holding period is forever” — and author and advisor coach Nick Murray — “Declines are temporary; the gains are permanent.”

“Volatility is the price you pay in order to play the game,” Silverman said. “To the three clients who said, ‘Get me out of the market,’ I said, ‘Let me ask you, when are you going to get back in? Is the market going to tap you on the shoulder and tell you it has reached bottom and it’s time to get back?’ You can’t time the market. It’s time in the market, not timing the market.”

Reminding clients about why they have buckets also can be reassuring. Hertel sets up her clients with three buckets. One holds five years of their income needs in a fixed account. The other two are allocated for medium-term needs, with about 60% invested in equities, and long-term needs, which could have 90% or more in equities, depending on their goals and how close they are to retirement.

“Bucket 1 is safe and guaranteed, and it’s a reminder that we can ride this out,” Hertel said. “We got through 2022 and refilled Buckets 2 and 3 when we had great years. Now we have to ride it out again. That’s why Bucket 1 did not feel good when the S&P 500 was up 20% and Bucket 1 was up only 4%, but it feels real good now.”

Hartey, who oversees a fund management firm and a wealth management practice, also sets clients up with three buckets, with one having approximately three years’ worth of cash to cover short-term expenses. Each quarter, his practice emails clients a 10-minute video plus a transcript, featuring an interview with a fund manager answering three questions: What happened during the last quarter? What are we changing for the next quarter? What do we think that is going to do? The video has a 40% open rate.

“Some clients reply back to the emails saying thank you, and when we’re sitting down with them, they’ll say, ‘Thanks so much for sending that, it helped calm my nerves,’” Hartey said.

COVID and now

The waning days of the pandemic were obvious as infection rates declined and health agencies declared the global emergency was over. When the current market volatility will settle is less predictable.

“During COVID, every investment house was giving us tons of material and webinars. It felt like every day there was something available, but this time it doesn’t feel as comprehensive as it was then,” Hertel said. “Back then you could expect a light at the end of the tunnel, but now the market continues to swing on the news. I can understand why the investment houses can’t give anything forward looking.”

Hartey’s practice had more nervous clients calling during the pandemic. “People were really worried then, but with this market, there seems to be the sense among clients that we’ve been here before,” he said. “We’ve got very good structure around how we communicate with clients on a regular basis.”