Advisers tell clients market volatility is the new normal

With the S&P 500 down 2.2% on the first trading day of the second quarter, advisers reassure clients and tell them not to panic

Apr 2, 2018 @ 4:00 pm

By Jeff Benjamin

Financial advisers had their hands full on the first trading day of the second quarter as the S&P 500 index dropped 2.2% Monday.

The message financial advisers presented to clients was that volatility is back, but that doesn't mean it's time to panic.

"I tell my clients we're now in a period of peaks and valleys, and this is the new normal for the markets," said Gregory Sarian, managing director at The Sarian Group at HighTower.

In addition to sticking to the financial plan, Mr. Sarian is telling clients to "be proactive in market lifts if you need liquidity," and to "use dips like this one today to buy into this market."

"It's important to pay attention to your circumstances right now," he added. "The calm, slow grind of the past few years was not normal. This kind of environment is more like a normal market environment."

One of the things that makes the market volatility appear more extreme in the eyes of clients is the typical focus on the Dow Jones Industrial Average, which at one point was down more than 700 points. It closed the day down 458.92 points.

"Instead of focusing on the past 24 hours, we tell investors to focus on the past 24 years, and then to look forward to the next five-to-10 years," said David Bach, co-founder of AE Wealth Management.

"If your goals haven't changed then your behavior when the market overreacts shouldn't change," he added.

At AE, Mr. Bach is directing advisers to start rolling out the literature and charts that have been created exactly for these kinds of market moves.

"We have created a workbook to put in front of clients to remind them that market corrections happen," he said. "The most important thing to understand is how not to psychologically overrespond, and the best thing you could do is not turn on the news."

While some news outlets were touting the April 2 market decline as "the worst second-quarter start since the Great Depression," financial advisers were encouraging clients to keep things in perspective.

"This is the same correction we've been in since Jan. 26," said Paul Schatz, president of Heritage Capital.

"Right now, the markets are groping for a bottom, and we could see a 1,000-point drop this week," he added. "If the market flushes everybody out this week, you have a shot at putting in a new low, and then I still think we're heading toward new highs."

Mr. Schatz, who said he is always more active during periods of market declines, has increased exposure to commodities and large-cap value stocks, while reducing exposure to the technology sector.

In terms of talking with clients, he reminds them that there is no rational reason to react when the market is falling.

"I tell them if we weren't smart enough to do X before the market declines, doing it during a decline won't help anything," he said. "I always remind my clients of the plan we have in place that accounts for 10% to 12% declines."

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

4 secrets to adviser growth: Client experience

The client experience is critical for firms to thrive today. This is especially true for your wealthiest clients. SEI's John Anderson and Allie Carey offer some strategies for success.

Latest news & opinion

Top 10 RIAs in the South

These are the largest registered investment advisory firms in the Southern U.S., based on AUM.

Top 10 RIAs in the Midwest

These are the largest registered investment advisers in terms of AUM in the Midwestern U.S.

Top 10 RIAs in the Northeast

These are the largest registered investment advice firms in the Northeastern U.S., in terms of assets under management.

10 predictions for financial advice in 2019

Deloitte expects these 10 changes will hit the financial advice business in 2019.

Midwestern magic? RIA assets soared nearly 30% there last year

Theories for what's driving the growth spurt abound, but it surpassed all other regions of the country.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print