Market slide awakens nervous investors, puts advisers back to work

Some reach out to clients who need hand-holding, while others see decline as opportunity to drum up new business

Oct 11, 2018 @ 2:02 pm

By Jeff Benjamin

Volatile financial markets are when some financial advisers do their best work — not necessarily with investments, but with clients.

"I know there are four or five 'Nervous Nellie' clients that I need to make a phone call to," said Lee Baker, president of Apex Financial Services, regarding this week's stock market decline.

"In situations like this we send out a proactive email reminding clients not to panic," he added. "But we also tell them to call if they really need to talk about their situation."

As the result of this week's sharp market decline — with an hour to go Thursday, the Dow Jones Industrial Average was down more than 500 points after an 800-point drop on Wednesday — a lot of financial advisers were rolling up their sleeves and preparing to remind clients of mantras that have usually been repeated many times about staying the course and investing for the long term.

But just like extreme weather conditions that come and go on a regular basis, big market events can be unsettling.

"I have one client who has needed a lot of hand-holding over the past year and last night he said he wanted out of the market," said Dennis Nolte, vice president of Seacoast Investment Services.

Obliging the client's request, Mr. Nolte sold positions that were still positive, effectively rebalancing the portfolio from 65% stocks and 35% bonds, to 30% stocks and 70% in cash and bonds.

To help head off such knee-jerk reactions from clients, Mr. Nolte said he regularly sends out correspondences about market cycles, but he doesn't think most clients pay attention until markets experience big declines.

"We know who tends to get nervous and we know which folks are able to sit through it," he added. "When it comes to communication, it has got to be verbal and sometimes it requires a face-to-face sit down."

While some advisers scramble to calm the nerves of certain clients, others are rolling out the welcome mat to investors who might have been lulled into thinking markets always go up and that investing is easy.

"This is the sort of thing that leads younger investors to think that maybe they need some help," said Caedmon Bear, founder of Honeycomb Financial.

"One of the challenges of a market that's gone up for 10 years is people think they're rock stars on their own," he added.

Mike Giefer, an adviser at The Johnston Group, said such market pullbacks can be "a good reminder that markets don't just go up."

"It's a good reset for people who maybe have gotten too comfortable with the direction of the markets," he added. "There are risks in investing, but the risk is really the price of admission to benefit from long-term growth. Over the course of someone's investing life you're going to see everything. It's not abnormal, it's just what the experience is like."


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