The U.S. stock markets had the worst day of the year on Monday, reacting to news of escalating trade issues with China and fears of an economic slowdown. After the Dow closed down 767 points, investors are understandably nervous. But as a financial advisor, how should you communicate with your clients about market volatility? And can you use the events to find opportunities to get new clients?
Never let a good crisis go to waste—or in this case, a dip in the stock market. Market volatility is a powerful marketing opportunity for two reasons. First, your campaign about volatility is likely to get twice as many views and shares as your other campaigns, as we can see in this example from back in 2016. Second, prospects have unprecedented urgency to act during an uncomfortable market dip.
As a financial advisor, you know that market declines are a normal part of investing. But your clients are likely nervous about the recent market volatility and may want to hear from you. It’s your job to keep them calm and informed during volatility. But what’s the best way to communicate about the recent market events? And can you take advantage of the volatility as a marketing opportunity?
Why You Should Communicate During Volatility
Proactive communication is good client service. Your clients hire you to not only help plan for their financial future, but to educate them in good times and in bad. They are eager to hear from you to get an explanation of what’s going on and receive some guidance on what they should (or shouldn’t) do about it.
It’s your job to keep clients from selling when the market is down. We all know that behavior is an important component to long-term investment success, and when clients are feeling the urge to sell when the market is low, it’s your place to remind them of their long-term plan.
Staying in touch results in fewer phone calls and panicked clients. If you’re able to act quickly, clients are more likely to trust that you’re prepared for the volatility and they’ll feel they’re in good hands. This results in less time spent educating and calming individual skittish clients.
What You Should Say About Market Volatility
I think that most advisors wait too long to communicate during market swings because they know that each event is different and they’re waiting to fill in the specifics. And we know that the markets may correct after a big decline. But no matter the specific situation, your key messaging will be the same. You’ll want to communicate the following key points to clients:
This is expected. Explain that you have been anticipating volatility and that it’s a normal and healthy part of market cycles. Point to historical data that shows the frequency of similar events.
Their portfolio is not down as much as the market. Remind your clients that while the S&P 500 may be down X% percent, their accounts are not invested in the index and have therefore declined less than the market. Urge them to call you if they have questions about their individual accounts.
Now is not the time to sell. Explain that no one can consistently predict the right time to get in or out of the market. It’s human nature to lose patience and sell at or near the bottom of a downturn. Even if you were able to get out early in a decline, you’d still have to guess when to get back into the market, and you’d likely guess wrong.
They have not realized any losses yet. It’s normal to feel uncomfortable when the market is down, especially if you’re approaching retirement. However, each time in history that the market has gone down, it has come back up again. Average downturns of 10% are likely to return to normal within about 115 days, based on historical data.
Stay focused on the long term. Remind clients that you’ve built their financial plan and investment strategy for the long term, with short-term volatility in mind. While a correction can be upsetting, there’s no reason to deviate from their long-term financial plan.
Call if they have questions. Encourage clients to get in touch if they are feeling nervous or want to review their accounts.
How to Use Volatility to Get New Clients
Now that you’ve proactively communicated with your existing clients, it’s time to use the market downturn as an opportunity. Downturns bring precious urgency that we don’t find at any other time. Prospects who have put off financial planning for most of their lives are not easily pushed into action when times are good. But when times are bad, things get very uncomfortable and they’re more willing to talk. Here’s how to go after referrals when times are bad:
Include a deal for your clients’ friends and family. Offer to provide a complimentary second opinion and recommendations to minimize losses.
Provide an easy action to take. Share a link to schedule a 15-minute investment review by phone. This way, even if prospects read your email after hours, they can take action when they’re feeling peak urgency and sleep better that night.
Remind clients that you are never too busy to help the people they care about. Reiterate that if they have friends, family, or coworkers who are nervous about the market volatility, you are here to help. Encourage them to forward your market update email to their network.
Bring up outside accounts. Make a point to mention to clients that while the accounts you manage are prepared for this correction, now is a good time to review old 401(k)s and other assets you do not currently manage to assess risk.
Want to learn more about how to market during a crisis? Watch this free webinar where I’ll teach you how to multiply your best clients and help more people during the coronavirus pandemic.
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[…] How to Communicate With Your Clients About Market Volatility (Claire Akin, Indigo Marketing) – With the sudden rise of significant market volatility this week, which has already put us in the “correction” zone (markets down more than 10% from their highs), client nervousness begins to rise… along with outright phone calls and emails from some clients. Which simply means that now is the time to get proactive in communicating with clients about market volatility (although bear in mind that your most hands-off delegator clients may not have even heard the news in the first place, so don’t scare them!). In terms of what to actually say, Akin suggests some straightforward but good reminder talking points, including: “This is expected” (volatility is a normal part of market cycles, and in fact a 10% pullback already happens on average about once per year… so we were actually overdue!); remind them that their portfolios are not likely down as much as the market (as a diversified portfolio of stocks and bonds is down far less than the 10%+ decline from the peak of the S&P 500 itself); they haven’t realized any losses yet and now is not the time to sell (yes, it seems ‘obvious’ to you, but it’s still important to actually say it), and in fact may be a time to buy (as a recent Schroders analysis this week shows that the 10 biggest one-day stock declines in the past 30 years produced an average of 25% returns over the following 12 months!). In fact, Akin suggests that this can actually be a good time to encourage referrals, since many people don’t feel a need to change advisors when times are good, but are reminder about the need when the market turns. Accordingly, she suggests strategies like offering a complimentary second opinion to any friends and family of clients, make it easy for people to schedule a quick meeting with you if they want to check in (e.g., using an Online Scheduling software tool), or bring up the question of how their “outside” accounts are doing if there’s still a portion of their portfolio that you’re not managing yourself. […]