Advisor calls spike as stocks selloff

Financial advisors, did you ever notice that clients most often “check in” during big market selloffs, as opposed to when their portfolios quietly creep higher?

Advisors woke up Monday to find the S&P 500 and the Nasdaq set to open nearly 4 percent lower on the heels of a more than 12 percent overnight drop in Japanese stocks. The CBOE Volatility Index, or the so-called fear index, surged past 65 at the start of the day, more than 4 times the previous week’s level.  

They also found a number of nervous clients lighting up their phones and filling their inboxes.

“While our long-time clients understand that markets go through down periods, it’s mostly our new clients who call, and this gives us an opportunity to get to know them even better,” said Patrick York, partner at Premier Path Wealth Partners.

York adds that he not only uses the call to walk these more recent clients off the proverbial ledge, but to remind them of the thorough preparation they undertook before the market turbulence. Having a calming voice on the other end of the phone to listen to their concerns and provide reassurance is crucial, according to York. 

Meanwhile, Matt Kilgroe, president and CEO of Cyndeo Wealth Partners, uses those anxious calls to remind clients about what they actually own when they hold stocks. 

“Our strategies focus on owning good businesses that make profits and share those profits with shareholders either in the form of dividends, stock buy backs or capital investments to grow future profits,” said Kilgroe. “If we own Coke or Home Depot or Microsoft we ask the client, ‘do you think the world is going to stop buying their products?’” 

Elsewhere, Patrick Nerney, senior vice president of investments at Dynasty Financial Partners, uses such severe market downdrafts to remind clients why diversification in both equity and fixed income is necessary.

“From a fundamental perspective, not much has really changed in the underlying valuation for most of the market. There is no need to do anything drastic,” said Nerney.

And David Flores Wilson, certified financial planner at Sincerus Advisory, believes the most effective way to calm anxious clients is to have conversations about market volatility before it actually happens. In his view, clients should already know that historically pullbacks of over 10 percent are likely every 2 to 3 years, and corrections over 20 percent should be expected every 6 to 7 years.

“Regularly presenting historical market data and anecdotes to clients during all types of markets has been effective for us,” said Wilson.

Turning it around, Chris Brown, private wealth advisor and managing director at Kingswood US, views market selloffs as buying opportunities.

“In most cases, we have assets positioned to buy the dips. Americans love a good sale and we love to buy on sale,” said Brown.

Rob Branch, certified financial planner at Prime Capital Financial, is also using the market’s dislocation to make a few moves. In his case, locking in interest rates on structured notes at levels far above recent yields in the 2 to 3 year duration space. 

“We are able to rotate some of the higher cash and short-term bond levels that we have in their allocations due to the yield curve dynamics these past couple of years into tactical equity positions at better entry point and lower risk,” said Branch. “These are lemons into lemonade kind of days.”

Finally, Ed Stober, senior wealth advisor at Nepsis, uses a technique called the Four R’s – “recognize, reflect, reframe, and reposition” - to help clients effectively manage their emotions before making a move they might regret.

“To help the client reduce their anxiety, I affirm the client’s feelings and let them know that it is a common reaction to these types of events. Then I get them to talk about and reflect on how they are feeling, vocalizing these feelings also helps to reduce anxiety,” said Stober.

“Next, I help the client reposition their focus by providing clarity in what is happening and that we are prepared. I remind the client that at Nepsis we see periods of market volatility and events like these as opportunities to buy more shares of successful companies,” said Stober. “This can cause them to reflect and reframe their perspective towards the opportunity versus the volatility of price.”