More advisors offer advice for keeping cool in a market storm

It was a busy Monday for financial advisors, many of whom were forced to spend hours on end talking clients down from proverbial ledges as the stock selloff gained steam.

Yesterday InvestmentNews caught up with a number of wealth managers in between those client calls to learn their secrets for dealing with anxious investors. Once the market closed – down 3 percent on the S&P 500 – we heard from even more advisors about their strategies for keeping their heads when seemingly everybody around them is losing theirs.     

Kelly Milligan, managing partner at Quorum Private Wealth part of Sanctuary Wealth, for example, says on days like yesterday he reminds clients that their strategy to achieve their financial goals hasn’t changed. To allay their fears, he shows them the math in real time.

“Volatility in markets in inevitable, normal, and usually healthy,” said Milligan. “The time to prepare for volatility is not the day that it happens. It’s months and years in advance and starts with a discussion about risk tolerance and the power of diversification.”

Elsewhere, Coleman Benko, certified financial planner at Benko Financial Services, says the most effective method for calming our anxious clients is two-fold.

“First, we set realistic expectations for market volatility and downside risk inside the portfolio. We talk about computer-aided trading and technology has increased the speed of trading and volume of trading, resulting in faster whipsaw moves in the markets,” said Benko. “Secondly, we implement downside hedging strategies to help our clients have a smoother ride and finite downside protection in certain instances.”

Brent Chappell, founder of Chappell Wealth Management a partner firm of Sanctuary Wealth, says he uses such selloffs to remind clients that periodic corrections and downturns are a normal part of healthy market cycles and should be expected to occur. 

“Thankfully, markets have always recovered and have gone on to reach subsequent new highs. A stock market decline should not be considered one of the primary risks of being an investor but rather the price of admission for higher expected returns,” said Chappell. 

Added Chappell: “The real risk materializes if one is forced to sell while prices are temporarily low. It is precisely the reason to keep enough capital in cash and high-quality bonds to weather the eventual storm without being forced to sell.”

Brent Weiss, co-founder and head of financial wellness at Facet, says this week’s sell-off provided an excellent opportunity for advisors to showcase a very valuable skill in the client/advisor relationship and that is to prevent clients from potentially making big mistakes.

“The best advisors know that emotional intelligence is a critical 21st-Century skill. We need to understand how our clients think and feel about money. Some require a little more empathy. Others require a bit of tough love. And some require a more logical and rational response,” said Weiss.

In his view, the right approach can make all the difference in getting a client from an anxious and emotional state to one of financial calm, where they’ll make healthier choices.

Craig Robson, founding principal and managing director at Regent Peak Wealth Advisors, says his most effective technique for calming clients in times of market stress is to remind them of how they designed their current financial plan together, as well as the corresponding allocation to include periods of downside volatility.

“While this isn’t enjoyable, it is expected periodically,” said Robson.